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Edited version of private advice
Authorisation Number: 1052085466942
Date of advice: 8 February 2023
Ruling
Subject: Commissioner's discretion - section 99A
Question 1
Will the Commissioner exercise 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 trust is a testamentary trust created in accordance with the will of the deceased. Subparagraph 99A(2)(a)(i) provides the Commissioner with the discretion to tax the trust under section 99 if it was created under a will.
Having considered the relevant facts and circumstances, the commissioner will grant his discretion to tax the trust under section 99 of the ITAA 1936.
Question 2
Will any part of the gain from the disposal of securities be assessable to the deceased's spouse?
Answer
No.
As the deceased's spouse has not been conferred present entitlement to the capital gain from the sale of the securities, the amount will be assessable to the trustee under Section 99 of the ITAA 1936.
Question 3
Will any part of the gain from the disposal of the securities be assessable to the remaindermen?
Answer
No.
As the remaindermen have not been conferred present entitlement to the capital gain from the sale of the securities, the amount will be assessable to the trustee under Section 99 of the ITAA 1936.
This ruling applies for the following period:
Year ended 30 June 20xx
The scheme commenced on:
1 July 20xx
Relevant facts and circumstances
The Testamentary Trust (the fund) was created from the estate of the deceased upon their death in 20XX in accordance with their Will to provide an annuity for the deceased's spouse and a residuary benefit for two of their children upon the spouse's death.
Provisions in the will state that the executors of the trust shall add to the fund any income accrued from the capital and assets of the fund from time to time.
Provisions in the will state that the deceased's spouse is to be presently entitled to the entirety of the net income generated by the estate not less than four times annually.
During a year of income there was a takeover of securities. The takeover resulted in a capital gain.
The Trustees have resolved to retain the gross proceeds of disposal of the security as part of the corpus or capital of the estate, for the eventual benefit of the remaindermen.
No part of the proceeds of sale will be distributed to the spouse of the deceased.
No loans of money or other property have been made to the trust.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 99
Income Tax Assessment Act 1936 section 99A