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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your private ruling

Authorisation Number: 1012595754784

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Ruling

Subject: trust distribution

Questions

    1. Is the trustee of a testamentary trust liable to pay tax on interest income of the trust estate earned in the 2013-14 financial year where the beneficiary is presently entitled and not under a legal disability?

    Answer: No

    2. Is the beneficiary of a testamentary trust liable to pay tax on a distribution of interest income earned in the 2013-14 financial year when the beneficiary is presently entitled and not under a legal disability?

    Answer: Yes

    3. Is the trustee or beneficiary of a testamentary trust liable to pay tax on a distribution of corpus to the beneficiary?

    Answer: No

This ruling applies for the following period:

Year ended 30 June 2014

The scheme commenced on:

July 2013

Relevant facts and circumstances

The trustee intends on distributing income and corpus to the beneficiary.

The beneficiary is presently entitled and not under a legal disability.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 97.

Income Tax Assessment Act 1997 Subsection 6-5(2)

Income Tax Assessment Act 1936 Subsection 95(1)

Reasons for decision

The liability to taxation on the net income of a trust is determined under the following sections of the Income Tax Assessment Act 1936 (ITAA1936):

    • section 97 applies where a beneficiary is presently entitled to a share of the net income and is not under a legal disability

    • section 98 applies where a beneficiary is presently entitled but is under a legal disability, and

    • sections 99A and 99 apply where there is an absence of present entitlement of the beneficiary to all or some of the net income of a trust estate.