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Edited version of your written advice
Authorisation Number: 1012723188961
Ruling
Subject: Administration of estate - un-presented invoices
Question
For the ended 30 June 2014, did your trust estate have presently entitled beneficiaries?
Answer
No
This ruling applies for the following period:
Year ended 30 June 2014
The scheme commences on:
1 July 2013
Relevant facts and circumstances
The deceased passed away during the year ended 30 June 20XX. You, as trustee, believed that, during the same income year, the administration of the estate was ready for completion. However, one of your creditors has not presented you with their fee amount and invoice, despite your efforts to obtain it.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 97
Income Tax Assessment Act 1936 Section 99
Reasons for decision
Section 97 of the Income Tax Assessment Act 1936 (ITAA 1997) assesses the beneficiary of a trust estate where that beneficiary is presently entitled to a share of the trust income and is not under a legal disability.
Section 99 of the ITAA 1997 assesses certain income to the trustee at normal rates of tax where the Commissioner is of the opinion that it would be reasonable that this section should apply.
For example, Taxation Determination TD 92/192 explains, if no beneficiary is presently entitled, income derived by a resident deceased estate is taxed at resident individual rates for the remainder of the financial year after the date of death and the next two financial years.
Taxation Ruling IT 2622 is about present entitlement during the stages of administration of deceased estates. It states:
…a beneficiary of a deceased estate cannot be presently entitled to the income of the estate until the estate has been fully administered
…an estate has been fully administered by payment or provision for the payment of funeral and testamentary expenses, death duties, debts, annuities and legacies and the amount of the residue thereby ascertained, the income of the residuary estate is the income of the executors and not of the residuary beneficiaries.
During the intermediate stage of administration of a deceased estate…the point may be reached where it is apparent to the executor that part of the net income of the estate will not be required to either pay or provide for debts, etc. The executor in this situation might in exercise of the executor's discretion, in fact, pay some of the income to, or on behalf of, the beneficiaries. The beneficiaries in this situation will be presently entitled to the income to the extent of the amounts actually paid to them or actually paid on their behalf. The fact that the estate has not been fully administered does not prevent the beneficiaries in this situation from being presently entitled to the income actually paid to, or on behalf of, the beneficiaries.
In your case, at this current time, the Commissioner's view on your question is that found in IT 2622, quoted above. Therefore, if you cannot make payment or provision for the solicitor's costs (and thereby ascertain the amount of the residue) then it must be held that the beneficiaries of the estate are not present entitled beneficiaries. It follows the income of the estate is assessable to the trustee.
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