ATO Interpretative Decision

ATO ID 2002/947 (Withdrawn)

Income Tax

Excepted Trust Income - testamentary trust
FOI status: may be released
  • This ATO ID is withdrawn as it is a straight application of the law and does not contain an interpretative decision.
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Status of this decision: Decision Withdrawn 11 April 2014
CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is income distributed from a testamentary trust to the taxpayer, a beneficiary of the trust who is under 18 years of age, 'excepted trust income' under subsection 102AG(2) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Decision

Yes. The income distributed from a testamentary trust to the taxpayer, a beneficiary of the trust who is under 18 years of age, is 'excepted trust income' under subsection 102AG(2) of the ITAA 1936.

Facts

Under the terms of a will, a testamentary trust was created which would provide for the benefit of specified beneficiaries.

The taxpayer, one of the beneficiaries of the testamentary trust, is under 18 years of age at the end of the income year and receives a distribution.

The taxpayer is not an 'excepted person'.

Reasons for Decision

Division 6AA of Part III of the ITAA 1936 ensures that special rates of tax and a lower tax free threshold apply in working out the basic income tax liability on taxable income, other than excepted income, derived by a prescribed person.

A 'prescribed person' is defined in subsection 102AC(1) of the ITAA 1936 to mean any person, other than an 'excepted person' (as defined in subsection 102AC(2) of the ITAA 1936), under 18 years of age at the end of the income year.

The taxpayer is a 'prescribed person' for the purposes of Division 6AA of Part III of the ITAA 1936.

Division 6AA of Part III of the ITAA 1936 will apply, where the beneficiary of a trust is a 'prescribed person', to so much of the beneficiary's share of the net income of the trust that is not 'excepted trust income' (subsection 102AG(1) of the ITAA 1936).

Subsection 102AG(2) of the ITAA 1936 lists the various types of income of a trust estate which are 'excepted trust income' in relation to the beneficiary of the trust estate. Assessable income derived by a trust which resulted from a will (a testamentary trust), is listed as 'excepted trust income' (subparagraph 102AG(2)(a)(i) of the ITAA 1936).

Therefore, the income distributed from a testamentary trust to the taxpayer, a beneficiary of the trust who is a prescribed person, is 'excepted trust income' under subsection 102AG(2) of the ITAA 1936.

Date of decision:  5 September 2002

Year of income:  Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1936
   Division 6AA of Part III
   subsection 102AC(1)
   subsection 102AC(2)
   subsection 102AG(1)
   subsection 102AG(2)
   paragraph 102AG(2)(a)(i)

Keywords
Children's income
Minor beneficiaries
Deceased estates
Trustees
Prescribed person issues
Deceased taxpayers
Testamentary trusts

Business Line:  Private Groups and High Wealth Individuals

Date of publication:  1 October 2002

ISSN: 1445-2782

history
  Date: Version:
  5 September 2002 Original statement
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