Edited version of private ruling

Authorisation Number: 1011570282219

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Ruling

Subject: Residency of deceased estate

Is the deceased estate considered to be a resident trust estate for taxation purposes?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

Relevant facts

The deceased was a non-resident taxpayer at their date of death.

By Will and Testament of the deceased, signed in an overseas country, the deceased appointed non-residents as both legal personal representatives and beneficiaries.

The deceased had property located in Australia. An Australian resident was appointed by Power of Attorney by the legal personal representatives to apply for a grant of Letters of Administration of the deceased estate in Australia.

Letters of administration were granted to a resident of Australia.

For the years in question no beneficiary was presently entitled to the income of the trust estate.

A copy of the last Will and Testament, Letters of Administration and Power of Attorney have been provided.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1936 Subsection 95(2)

Income Tax Rates Act 1986 Subsection 12(6)

Reasons for Decision

Subsection 95(2) of the Income Tax Assessment Act 1936 (ITAA 1936) contains the definition of a resident trust estate for the purposes of Division 6 of ITAA 1936. Division 6 of the ITAA 1936 operates to identify whether the trustee or beneficiary should be assessed on the net income of the trust estate. Section 95(2) of the ITAA 1936 provides:

a trust estate shall be taken to be a resident trust estate in relation to a year of income if -

(a) a trustee of the trust estate was a resident at any time during the year of income; or

(b) the central management and control of the trust estate was in Australia at any time during the year of income.

Whether a trustee is a resident or not must be determined by the application of the definition of resident in section 6(1) of the ITAA 1936. If the trustee is a natural person then a resident of Australia is defined in section 6(1) of the ITAA 1936 to mean:

(a) a person, other than a company, who resides in Australia and includes a person:

(i) whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside of Australia;

(ii) who has actually been in Australia, continuously or intermittently, during more than one half of the year of income, unless the Commissioner is satisfied that his usual place of abode is outside Australia and that he does not intend to take up residence in Australia; or

(iii) who is:

(A) a member of the Superannuation scheme established by deed under the Superannuation Act 1990; or

(B) an eligible employee for the purposes of the Superannuation Act 1976; or

(C) the spouse, or a child under 16, of a person covered by sub-paragraph (A) or (B);.....

In this case, although the Will appointed non-resident individuals as trustees, a resident was also appointed to act in the capacity of trustee by Power of Attorney and Letters of Administration were granted.

Subsection 95(2) of the ITAA 1936 requires only one of the trustees of the trust estate to be a resident, accordingly, the deceased estate is considered to be a resident trust estate for taxation purposes.

Tax Rates

Subsection 12(6) of the Income Tax Rates Act 1986 provides that Schedule 10 will apply the rates of tax payable by a trustee assessed pursuant to section 99 of the Act:

SCHEDULE 10 RATES OF TAX PAYABLE BY A TRUSTEE UNDER SECTION 98 OR 99 OF THE ASSESSMENT ACT

PART I - RESIDENT BENEFICIARIES AND RESIDENT TRUST ESTATES

1. In the case of a trustee who is liable to be assessed and to pay tax-

(a) under section 98 of the Assessment Act in respect of a share of a resident beneficiary of the net income of a trust estate; or

(b) under section 99 of the Assessment Act in respect of the net income or part of the net income of a resident trust estate, being the net income or part of the net income of the estate of a deceased person who died less than 3 years before the end of the year of income;

the rate of tax in respect of that share of the net income or that net income or that part of that net income is the rate that would be payable under Part I of Schedule 7 or Part I of Schedule 9, as the case requires, if one individual were liable to be assessed and to pay tax on that income as his or her taxable income.

Having regard to the above, the trustee of a resident deceased estate of a person who died less than three years before the end of the year of income, is taxed at general individual rates and entitled to a tax free threshold of $6,000.  

2008-09

2009-10

The above rates do not include the Medicare levy of 1.5%

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