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Edited version of private advice
Authorisation Number: 1012622867641
Ruling
Subject: Excepted trust income: transfer to new trust
Question
Will two existing 'excepted trust income' streams maintain their status as 'excepted trust income' if the funds are amalgamated into a single trust structure (for administrative ease) and are still held for the same beneficiaries in the same original proportions?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2014
The scheme commences on:
1 July 2013
Relevant facts and circumstances
Two separate trusts were created for two minors when their parent passed away intestate, into which the cash only superannuation benefit was paid.
To reduce the ongoing administration burden and fees, the trustee proposes to amalgamate the monies into a single discretionary trust, under the same conditions as established by the previous two trust deeds. The beneficiaries' entitlements in the new trust will be maintained in the same proportions as previously determined.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 102AG
Reasons for decision
Division 6AA of Part III of the (Income Tax Assessment Act 1936 ) ITAA 1936 applies higher rates to the income of minors, except where the minor is not a 'prescribed person' (i.e., where a minor is an 'excepted person') or where a minor's assessable income is 'excepted assessable income'.
Subsection 102AG(2) in Division 6AA of Part III of the ITAA 1936 is about 'excepted trust income' and includes, under paragraph 102AG(2)(c)(v), the following excepted trust income:
… the assessable income of a trust estate…in relation to a beneficiary of the trust estate to the extent to which the amount…is derived by the trustee of the trust estate from the investment of any property transferred to the trustee for the benefit of the beneficiary… directly as the result of the death of a person and out of a provident, benefit, superannuation or retirement fund…
In your case, we consider the new trust for your stated purpose will not change the status of the excepted trust income because the new trust will maintain the beneficiaries' entitlements in the same proportions as previously determined and because the new trust will continue to satisfy paragraph 102AG(2)(c)(v) of the ITAA 1936.