Edited version of private advice

Authorisation Number: 1052175295302

Date of advice: 3 November 2023

Ruling

Subject: Commissioner's discretion - section 99A

Question 1

Will the Commissioner exercise the discretion under subsection 99A (2) of the Income Tax Assessment Act 1936 (ITAA 1936) to tax the net income of the trust 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 to apply section 99A of the ITAA 1936 to the net income of the trust for the relevant income years. Accordingly, section 99 of the ITAA 1936 will apply.

Question 2

Are you eligible for the CGT discount upon disposal of the property?

Answer

Yes.

You are eligible for the CGT discount as you are the trustee of the trust estate, you held the property for greater than 12 months, and section 99A and 98 of the ITAA 1936 do not apply.

This ruling applies for the following period:

Year ended 30 June 2021

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

Person A (the Deceased) died several years ago.

The executors of the Deceased's estate (the Estate) are Person B, Person C and Person D (the Executors).

Probate was granted several months after the death of the Deceased.

The Estate was fully administered in the following year.

The Deceased's will directed that a testamentary trust consisting of the majority of the residual Estate be created in favour of Person E.

Person E is the sole beneficiary of the Trust.

Person E is an Australian resident for tax purposes.

Person E has had an intellectual disability since birth or early childhood. The Deceased was Person E's foster parent and carer for many years.

The Executors of the Estate are also the trustees of the Trust.

The terms of the Trust provide that:

•         the trustees are to hold that percentage of the residual trust estate in trust for the benefit of Person E, to be used and applied for the benefit of Person E as the trustees in their absolute discretion see fit;

•         the trust funds and income accrued in the Trust shall not vest in Person E and their only interest shall be in the payments actually made to them on their behalf;

•         when Person E dies, the trust shall terminate and all funds remaining shall be paid to Person B, Person C or Person D or to the survivor of them; and

•         if Person B or Person C predecease termination of the Trust, all funds remaining shall be paid to the three named individuals equally or to the survivor of them.

The residual assets of the Estate consist of the following:

•         the Deceased's main residence (Property A)

•         an amount of cash

•         a motor vehicle

•         personal belongings.

The corpus of the Trust consists of the assets above.

No person has directly or indirectly transferred money or property to the Trust or attached any special rights to the property of the Trust.

Since administration of the Estate, the Trust has undertaken the following actions:

•         sold Property A

•         purchased Property B using the proceeds from the sale of Property B

•         sold Property B with settlement occurring several months later

•         purchased Property C using the proceeds from the sale of Property B

•         collected rental amounts from Property B and Property C.

None of the income from the disposal of Property B was distributed to Person E.

Several amounts from the collection of rental income were distributed to Person E during 20XX and 20XX

Relevant legislative provisions

Income Tax Assessment Act 1936 section 98

Income Tax Assessment Act 1936 section 99

Income Tax Assessment Act 1936 section 99A

Income Tax Assessment Act 1997 section 115-110