Disclaimer
This edited version has been archived due to the length of time since original publication.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.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1051406867682

Date of advice: 27 July 2018

Ruling

Subject: Assessable income

Question

Is the estate assessable for the 2017 financial year for interest on a loan to the family trust?

Answer

No.

This ruling applies for the following period:

Financial year ended 30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You are the executor of a deceased estate.

Probate for the estate was granted in 2016 and you distributed all assets of the estate to the beneficiaries in 2016.

A loan from the deceased to the family trust was discovered as outstanding and an amended probate was granted on in 2017.

There is no formal loan agreement and no history of interest being charged by the lender on the loan amount.

A meeting was held by the directors of the corporate trustee of the family trust (including the deceased) more than 10 years ago which resolved that: all loan monies received by the family trust, specifically from the deceased, is at call, and subject to interest at a rate to be determined by the lender or their legal representative at the end of the financial year.

You, as legal personal representative of the deceased made no determination regarding interest payable on any loan amounts and the estate did not receive any amounts from the family trust in the 2017 financial year. Also, you as legal personal representative of the deceased, have never made any demands or requests for interest to be paid on the loan.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 95

Income Tax Assessment Act 1936 section 97

Reasons for decision

There is no formal loan agreement and no history of interest being charged by the lender on the loan to the family trust.

The only stipulation in relation to interest is contained in a resolution from the meeting of the directors of the corporate trustee of the family trust (including the deceased).

That resolution states that interest for a financial year is to be determined at the end of the financial year by the lender or their legal representative.

You as the executor of the deceased lender’s estate are the deceased’s legal representative.

You did not make any determination regarding interest payable on the loan at any time during the 2017 financial year. Also, the estate did not receive any amounts from the family trust in the 2017 financial year.

Based on the facts provided, there was no interest payable on the loan for the 2017 financial year and therefore no interest to be received by the estate. Also, the facts provided are that the estate did not receive any interest on the loan during the 2017 financial year. Therefore, the estate is not assessable for any interest on the loan during the 2017 financial year.