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Edited version of private ruling
Authorisation Number: 1011584751016
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Ruling
Subject: Deceased Estate
Question 1
Are the beneficiaries of the estate presently entitled to all of the income of the estate?
Answer: Yes.
Question 2. If the beneficiaries are presently entitled to the income of the estate are they assessable on that income such that the trustee will not be assessable under section 99 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer: Yes
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
The deceased was the sole shareholder of a company.
The will directed that the trustees realise all the assets in the company and liquidate and deregister the company.
During the income year ended XXXX, the company disposed of various assets and transferred $XXXX to a trust account in the name of the estate.
The company paid the estate a fully franked dividend of $XXXX.
During that income year distributions of $XXXX were paid to the beneficiaries of the estate under the will.
The estate has not been fully administered.
The trustees of the estate are certain of the debts of the estate and have provided for them.
Reasons for decision
Taxation Ruling IT 2622 deals with the issue of present entitlement during the stages of administration of deceased estates.
IT 2622 explains as follows:
14. During the intermediate stage of administration of a
deceased estate (as described in paragraph 6 above), 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.
Application to your circumstances
You advised that all of the income of the trust estate for the XXXX income year was distributed to the beneficiaries in accordance with the terms of the Will and the trustees were certain of the debts of the estate and had made provision for them.
In accordance with IT 2622 we accept that the beneficiaries were presently entitled to all of the income of the trust estate for the XXXX income year.
As the beneficiaries are presently entitled to the income of the trust estate for the XXXX income year, they are assessable on the income.