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Edited version of private advice
Authorisation Number: 1052088476433
Date of advice: 21 February 2023
Ruling
Subject:Deceased estate - Commissioner's discretion
Question: Will the Commissioner exercise his discretion under subsection 99A(2) of the Income Tax Assessment Act 1936 (ITAA 1936) to tax the trustee of the Estate 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 Estate in relation to any income year in the ruling period.
Therefore, the Commissioner will exercise their discretion to allow section 99 of the ITAA 1936 to apply where the trustee of the Estate is liable to pay tax on income to which no beneficiary is presently entitled during the ruling period.
This ruling applies for the following periods:
Income year ended 30 June 20XX
Income year ended 30 June 20XX
Income year ended 30 June 20XX
Income year ended 30 June 20XX
Income year ended 30 June 20XX
Income year ended 30 June 20XX
The scheme commenced on:
1 July 20XX.
Relevant facts and circumstances
The deceased passed away and at the time they passed away they held a bank account and shareholdings in several companies.
Person A was appointed as the executor and trustee (the Executor) of the deceased estate (the Estate).
Probate was granted in the year after the deceased had passed away.
The shareholdings in one company were transferred to Person A as a beneficiary of the Estate and after a short period the bank account was closed.
Several beneficiaries of the Estate commenced legal proceedings in the Supreme Court (the Court) against the Executor in relation to the administration of the Estate which resulted in a Court order for the removal of the Executor and the appointment of an administrator (the Administrator) to administer the Estate.
A settlement was reached in relation to the legal proceedings which resulted in:
• An amount being awarded to the Estate to compensate it for the loss of dividends it should have received in relation to the percentage of the shares incorrectly transferred to Person A
• Several amounts to be paid to the Estate in relation to amounts previously withdrawn from the Estate by Person A: and
• An amount being awarded for legal expenses.
The Administrator is in the process of trying to finalise the administration of the Estate and bring all tax related affairs up to date with the assistance of newly engaged tax agents. However, they are experiencing difficulty in getting past records of the Estate from the former executor and their advisors.
The Administrator and new tax agents are not aware of any property being acquired by or intentionally lent to the Estate, or of any property acquired by the Deceased prior to their passing for any purposes other than the enjoyment of the Deceased during their lifetime.
There are no special rights or privileges attached to the property of the Estate.
The income of the Estate during the ruling period consisted of interest income in several income years, and dividends in several income years, which were derived from assets held or deemed to belong to the Estate as at the time the Deceased passed away.
It is anticipated that the Estate will be finalised in the income year after the end of the ruling period.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 99
Income Tax Assessment Act 1936 Section 99A
Income Tax Assessment Act 1936 Subsection 99A(2)
Income Tax Assessment Act 1936 Subsection 99A(3)