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Edited version of your private ruling
Authorisation Number: 1012598113050
Ruling
Subject: Deceased estate
Question
Is the Commissioner able to extend the three year period to apply the lower rates of tax or vary the rates of tax applicable under section 99 of the Income Tax Assessment Act 1936 (ITAA 1936)?
Answer
No.
This ruling applies for the following period(s)
Year ended 30 June 2013
The scheme commences on
1 July 2012
Relevant facts and circumstances
The deceased estate holds units in a managed fund that have been frozen since the global financial crisis.
The estate was not finalised within the three year period to apply the lower rates of tax or vary the rates of tax applicable under section 99 of the ITAA 1936.
Relevant legislative provisions
Income Tax Assessment Act 1936 - Section 99
Income Tax Rates Act 1986 - Section 12
Income Tax Rates Act 1986 - Schedule 10 - Part 1
Reasons for decision
The general practice is to assess the income of a deceased estate trust under section 99 of the ITAA 1936 unless there is tax avoidance involved. Deceased estates of the 'ordinary and traditional' kind (whose assets come directly from the assets of the deceased) are assessed under that section.
The rates of tax for trustees assessed under section 99 of the ITAA 1936 are found in section 12(6) of the Income Tax Rates Act 1986 (ITRA 1986), which directs attention to Schedule 10 of the ITRA 1986. Part 1 of Schedule 10 of the ITRA 1986 identifies two classes of trustees for the purpose of determining the rates of tax that are to apply.
In the first class are trustees who are liable to be assessed under section 99 of the ITAA 1936 in respect of resident trust estates of a deceased person where the income is derived in the year of death of the deceased or in any one of the following two years. These trustees are liable to pay tax at the rates applicable to resident individuals.
The second class of trustees identified in Part 1 of Schedule 10 of the ITRA 1986 comprises trustees liable to be assessed under section 99 of the ITAA 1936 in respect of income of a resident trust estate, other than the estate of a person who died fewer than three years before the end of the income year.
These trustees (including the trustees of testamentary trusts) are liable to tax at the rates specified for resident individuals except that they do not benefit from the tax free threshold.
There is no discretion available to the Commissioner to extend the three year period to apply the lower rates of tax or vary the rates of tax applicable under section 99 of the ITAA 1936.