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Edited version of private advice
Authorisation Number: 1051988593556
Date of advice: 21 June 2022
Ruling
Subject: Trusts - section 99A
Question
Will the Commissioner exercise his 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.
The Commissioner will exercise his discretion to tax the net income of the trust estate to which no beneficiary is presently entitled under section 99 of the ITAA 1936.
This ruling applies for the following periods:
Year ended 30 June 20xx
Year ended 30 June 20xx
Year ended 30 June 20xx
Year ended 30 June 20xx
Year ended 30 June 20xx
Year ended 30 June 20xx
Year ended 30 June 20xx
Year ended 30 June 20xx
Year ended 30 June 20xx
Year ended 30 June 20xx
Year ended 30 June 20xx
The scheme commences on:
1 July 20xx
Relevant facts and circumstances
The deceased, xx, passed away xx 20xx.
The will provided for the establishment of The xx Trust (the Trust).
Under the terms of the trust, the deceased bequeathed xx dollars ($xx) to his grandchild, xx (the beneficiary), born on xx 20xx and who was xx years old at the time that the deceased passed away.
Under the will, 'Education Expenses' means all costs, expense, levies, and the like relating to schooling undertaken by the beneficiary as determined in the trustees' absolute discretion.
The will provides that the Trust will end on the earlier of:
a) The date of death of the beneficiary
b) The date the assets of the Trust have been exhausted, and
c) The date the Trustee is satisfied that the beneficiary has completed secondary school education.
On the Trust end date, the Trustee will then hold the remaining capital and undistributed income of the Trust on trust until the beneficiary is xx years of age.
Under the terms of the will there is no power for the Executor to make the beneficiary presently entitled to the income of the Trust.
The entirety of the capital of the Trust is derived from the property of the deceased as at his date of death, and that capital is not derived from any other sources including without limitation, loans to the trust estate.
There is no benefit, special right or privilege conferred upon the trust estate as a result of the existence of the Trust or distributions being made from the Trust.
The Trustee is not entitled under the terms of the Trust to make distributions to the beneficiary until the age of xx when the remaining capital of the trust can be distributed.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 99
Income Tax Assessment Act 1936 section 99A
Income Tax Assessment Act 1936 section 99A (2) & (3)