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Edited version of your written advice
Authorisation Number: 1051176364232
Date of advice: 22 December 2016
Ruling
Subject: Trustee assessable under section 99A or section 99 of the ITAA 1936
Question
Will the Commissioner exercise his discretion to assess the Trust under section 99 of the Income Tax Assessment Act 1936 (ITAA 1936) for the 2015 financial year?
Answer
No
This ruling applies for the following period(s)
Year ended 30 June 2015
The scheme commences on
1 October 1997
Relevant facts and circumstances
The trust receives non-assessable payments and derives assessable interest income from the investment of these amounts.
No resolutions have been made by the trustees to distribute the interest income to any beneficiaries.
Assumption(s)
Nil
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 99
Income Tax Assessment Act 1936 Section 99A
Anti-avoidance rules
No
Reasons for decision
Section 99 or Section 99A
The trust has undistributed interest income and no resolutions have been passed to distribute this income to any particular beneficiaries. It is considered that there are no beneficiaries presently entitled to this income, therefore the trustee will be assessable on these amounts.
The trustee of a trust will normally be assessed under section 99A of the Income Tax Assessment Act 1936 (ITAA 1936) unless the Commissioner forms a view that it would be unreasonable for that section to apply. Where the Commissioner forms such a view, the trustee will be assessed under section 99 of the ITAA 1936.
Sub-section 99A(2) of the ITAA 1936 is in two parts. Firstly, the trust estate must have resulted from one of four sources. These are:
● from a will, codicil, intestacy, or a Court order relating to one of these categories;
● from property that has been vested to the Official Receiver in Bankruptcy, or another trustee under the Bankruptcy Act 1966;
● from property being administered under Part XI of the Bankruptcy Act 1966; or
● from property of a kind referred to in paragraph 102AG(2)(e) of the ITAA 1936.
The Trust has not resulted from any of these sources, therefore the trustee will be assessed under section 99A and not section 99 on income to which no beneficiary is presently entitled to in an income year.
The second requirement is that the Commissioner must be of the opinion that it is unreasonable to apply section 99A of the ITAA 1936 to the trust for the year of income. The matters that the Commissioner considers to determine this are set out in sub-section 99A(3) of the ITAA 1936.
These matters look at the source of the trust capital, including whether any loans have been made to the trust. The source(s) of the trust's income are also considered, as are any benefits conferred upon the trust, and any rights and privileges conferred on or attached to property held by the trust.
In the current case, there is no need to consider this requirement, as the first requirement has not been met.
As a result, the trust income to which no beneficiary is presently entitled is assessed in accordance with section 99A of the ITAA 1936.
Assessment Code 36 should be used in the Trust income tax returns.