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Edited version of your written advice
Authorisation Number: 1012845020108
Date of advice: 23 July 2015
Ruling
Subject: Trust
Question 1
Will the Commissioner exercise his discretion under section 99A of the Income Tax Assessment Act 1936 (ITAA 1936) to tax the estate under section 99 of the ITAA 1936?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
The scheme commences on
1 July 20XX
Relevant facts and circumstances
The Trust has X beneficiaries who are entitled to a portion of the corpus of the trust when they turn X years of age.
The trust came into existence pursuant to the will of A, who passed away on dd/mm/yyyy.
The Will directed the Executors of the estate to hold $X on trust for the X grandchildren of the testator who attain the age of X.
The will directs that if a grandchild does not attain the age of X years, then their estate is not entitled to any portion of the trust.
The corpus of the Trust is invested in bank accounts on which the trustee receives interest income.
Relevant legislative provisions
Section 99 of the Income Tax Assessment Act 1936
Section 99A of the Income Tax Assessment Act 1936
Reasons for decision
Section 99 of the Income Tax Assessment Act 1936 (ITAA 1936) will apply to the taxation of so much of the net income of a trust estate in relation to a year of income to which there is no beneficiary presently entitled in situations where section 99A of the ITAA 1936 does not apply.
All such income falls initially within the ambit of section 99A of the ITAA 1936. In a limited number of cases, the Commissioner has a discretion to assess the trustee under section 99 of the ITAA 1936 if he is of the opinion that it would be unreasonable that section 99A of the ITAA 1936 should apply.
Section 99A(2) of the ITAA 1936 gives the Commissioner a discretion to assess the trustee pursuant to section 99 of the ITAA 1936, rather than section 99A of the ITAA 1936, inter alia, in relation to a trust estate that resulted from a will, a codicil, an intestacy or a court order varying the provisions of a will, a codicil or the operation of the intestacy provisions
Subsection 99A(3) of the ITAA 1936 provides that in forming an opinion for the purposes of subsection 99A(2) of the ITAA 1936 the Commissioner is to have regard to certain matters.
(1) the circumstances in which and the conditions, if any, upon which, at any time-
a. property - including money - was acquired by or lent to the trust estate,
b. income was derived by the trust estate,
c. benefits were conferred on the trust estate, or
d. special rights or privileges - irrespective of whether they have been exercised - were conferred on or attached to property of the trust estate.
(2) whether any person, who has at any time, directly or indirectly-
a. transferred or lent any property (including money) to, or conferred any benefits on, the trust estate; or
b. conferred or attached any special right or privilege, or done any act or thing, either alone or together with another person or persons, that has resulted in the conferring or attaching of any special right or privilege, on or to property of the trust estate, whether or not the right or privilege has been exercised,
(3) has at any time, directly or indirectly, done any similar thing in relation to any other trust estate.
(4) such other matters, if any, as he thinks fit.
As the testamentary trust has been created in consequence of the provisions of a will and all the assets held in the trust arose from the will, the discretion under subsection 99A(2) of the ITAA 1936 is exercised to assess the income of the trust in accordance with Section 99 of the ITAA 1936.