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Edited version of private advice
Authorisation Number: 1051628297886
Date of advice: 21 January 2020
Ruling
Subject: Trustee Choice and Commissioner's discretion
Question 1
Is the Trustee able to make a choice under section 115-230 of the Income Tax Assessment Act 1997 (ITAA 1997) to be assessed on the capital gain made on the disposal of the trust property?
Answer
Yes.The Trustee will meet all the conditions of section 115-230 of the ITAA 1997 necessary to make the choice to be assessed on the capital gain in circumstances where no trust property representing the capital gain has been paid to or applied for the benefit of a beneficiary of the trust.
Question 2
Will the Commissioner exercise his discretion under subsection 99A(2) of the Income Tax Assessment Act 1936 (ITAA 1936) to tax the Trustee on income that no beneficiary is presently entitled to 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 trustee of the testamentary trust in the relevant income years. Accordingly section 99 of the ITAA 1936 will apply
Question 3
Will the trustee be entitled to apply the 50% capital gains tax discount to the capital gain made on the sale of the Property under Division 115 of the ITAA 1997?
Answer
Yes. As the trustee will be assessed under section 99 of the ITAA 1936, the trustee is entitled to the 50% CGT discount on the sale of the Property.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
The deceased's will appointed X as executor and Trustee.
The deceased's will provided that the Property be held on trust for X for their lifetime and upon their death, for X's children. The Property is the only asset of the trust.
The Trustee is concerned with the increasing costs associated with owning the Property and the impact that this will have on the ultimate distributions to beneficiaries. The Trustee now believes the sale of the Property is in the best interests of the beneficiaries.
The Trustees have received legal advice that the Property may be sold during X's lifetime. The Trustee intends to sell the Property to a third party and re-invest the capital proceeds from the sale in alternative income-producing assets in arm's length transactions. The investments will be held on the same terms as per Ian's will, that is, for X for their lifetime and X's children upon their death.
The trustees recognise that the sale of the Property will trigger a large capital gain and wish to make an election under section 115-230 of the ITAA 1997 to be assessed on the capital gain arising from the sale of the Property.
No loans have been or will be made to or from the trust. No person has or will directly or indirectly transferred money or property to the trust. There are no other trusts that the named beneficiary or any beneficiary of the trust has contributed to in any way.
Relevant legislative provisions
Income Tax Assessment Act Section 99
Income Tax Assessment Act Section 99A
Income Tax Assessment Act Section 115-230
Income Tax Assessment Act Division 115