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Edited version of your written advice
Authorisation Number: 1051329378980
Date of advice: 22 January 2018
Ruling
Subject: Trusts – excepted trust income
Question 1
Is the trust income considered excepted trust income within the meaning of section 102AG of Division 6AA?
Answer
Yes.
Excepted trust income is defined in subsection 102AG(2) of the Income Tax Assessment Act 1936 (ITAA 1936) and includes an amount that is assessable income of a trust estate that resulted from a Will, codicil or an order of a court that varied or modified the provisions of a Will or codicil (subparagraph 102AG(2)(a)(i) of the ITAA 1936. The Trust resulted from a Will and court order which satisfies the conditions set out in subparagraph 102AG(2)(a)(i) of the ITAA 1936.
Accordingly income derived from the investment of money transferred into the Trust from the superannuation death benefit and the life insurance proceeds will be excepted trust income.
Question 2
Will the Trustee be assessed on the income of the Trust Estate under section 98(1)?
Answer
Yes.
Subsection 98(1) of the ITAA 1936 applies to assess the trustee on a beneficiary’s share of income where a beneficiary is presently entitled and is under a legal disability. In this case, all the beneficiaries of the trust are under a legal disability as they are less than 18 years of age.
The court order and will provides that the estate will be held in ‘equal shares absolutely’ for the beneficiaries. This indicates that each beneficiary has an absolute entitlement to their share of the capital and income of the residual estate, and that should the death of a beneficiary occur before that beneficiary attained the age of 18 their share would pass to their estate. Although the beneficiaries are not able to receive there entitlement until 18 years of age, this does not prevent present entitlement. Therefore the trustee will be assessed under section 98(1) of the ITAA 1936.
This ruling applies for the following periods:
Year ending 30 June 2025
Year ending 30 June 2024
Year ending 30 June 2023
Year ending 30 June 2022
Year ending 30 June 2021
Year ending 30 June 2020
Year ending 30 June 2019
Year ending 30 June 2018
Year ending 30 June 2017
Year ending 30 June 2016
Year ending 30 June 2015
Year ending 30 June 2014
Year ending 30 June 2013
Year ending 30 June 2012
The scheme commences on:
1 July 2011
Relevant facts and circumstances
The deceased passed away at a point in time.
The deceased had children under the age of 18.
The Will of the deceased was amended by court order.
The court order also states that the residue of the estate of the deceased Will be held upon trust in equal shares absolutely for the children.
The funds of the estate have arisen from a superannuation death benefit and life insurance policies.
The children are prescribed persons within the meaning of 102AC and are not excepted persons.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 98(1)
Income Tax Assessment Act 1936 Section 100
Income Tax Assessment Act 1936 Division 6AA
Income Tax Assessment Act 1936 Section 102AC
Income Tax Assessment Act 1936 Subsection 102AA(3)
Income Tax Assessment Act 1936 Subsection 102AG(1)
Income Tax Assessment Act 1936 Subsection 102AG(2)
Income Tax Assessment Act 1936 Subparagraph 102AG(2)(a)(i)
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