| Disclaimer This edited version has been archived due to the length of time since original publication.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 private advice
Authorisation Number: 1051616586727
Date of advice: 4 December 2019
Ruling
Subject: Deceased estate - trust income
Question 1
For the 20XX financial year, is the net income of the Trust Estate that is attributable to the period after the death of the life tenant assessable to the Trustee?
Answer
Yes. As no residuary beneficiaries were made presently entitled to the net income of the Trust Estate during the year and the Trust Estate was not fully administered, the Trustee is assessable on the net income of the Trust Estate attributable to the period after the death of the Life Tenant.
Question 2
For the 20XX financial year, will the Commissioner exercise their discretion under section 99A of the Income Tax Assessment Act 1936 (ITAA 1936) to tax the net income of the Trust Estate to which no beneficiary is presently entitled under section 99 of the ITAA 1936?
Answer
Yes. After consideration of the relevant factors, the Commissioner is of the opinion that it would be unreasonable that section 99A of the ITAA 1936 should apply in relation to the Trust Estate. Accordingly, section 99 of the ITAA 1936 will apply to tax the Trust Estate at progressive individual rates that apply for the fourth and later years of the Trust Estate.
Question 3
When the administration of the Trust Estate is completed in the 20YY financial year, will the residuary beneficiaries be assessable on their share of the net income of the Trust Estate to which they are presently entitled?
Answer
Yes. The residuary beneficiaries who are made presently entitled to their share of the net income of the Trust Estate upon completion of administration will be assessable under section 97 of the ITAA 1936.
This ruling applies for the following period:
Financial year ended 30 June 20XX
Financial year ended 30 June 20YY
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The deceased died in 20XX. Probate of the will was granted in 20XX.
The will of the deceased gave a life tenancy over the deceased's assets to the deceased's sibling, with the deceased's other adult relatives as the residuary beneficiaries (The Trust Estate).
The Trust Estate property comprises of a rental property, shares and cash at bank. No assets have been transferred to the Trust Estate.
The net income of the Trust Estate has been distributed to the deceased's sibling each year since the passing of the deceased and they have declared this income in their personal tax returns.
The deceased's sibling passed away in 20XX. They were made presently entitled to the net income of the Trust Estate attributable to the period prior to their. The remainder of the net income of the Trust Estate for the 20XX financial year was income to which no beneficiary was made presently entitled.
The rental property was sold by contract dated 20XX. The Trustee plans to sell the shares in the 20YY financial year.
The capital proceeds from the sale of the rental property and shares, rental income and dividend income earnt prior to the sale and the cash at bank will be held in an interest-bearing bank account until the corpus and income of the Trust Estate is distributed to the residuary beneficiaries in the 20YY financial year and the administration of the Trust Estate finalised.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 97
Income Tax Assessment Act 1936 section 99
Income Tax Assessment Act 1936 section 99A