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Edited version of private advice
Authorisation Number: 1052194278081
Date of advice: 17 November 2023
Ruling
Subject: Deceased estate - fixed trust
Question 1
Is the Deceased Estate a fixed trust for the purposes of section 272-65 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) and subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
The ATO Interpretative Decision ATO ID 2006/279 - Income tax: Trust losses - fixed entitlement - beneficiaries of a deceased estates provides the ATO's view that a deceased estate in which the residuary beneficiaries have fixed entitlements to the income and capital of the estate can be regarded as a fixed trust.
The Commissioner is satisfied that in your case, the residuary beneficiaries do have fixed entitlements to the income and capital of the estate.
Therefore, based on the information provided to the Commissioner, the deceased estate is a fixed trust.
Question 2
Is the trustee of the deceased estate liable to pay tax in respect of an amount to the extent that the amount gives rise to a capital gain that is disregarded for a beneficiary under subsection 855-40(2) of the ITAA 1997?
Answer
No. Based on the information provided to the Commissioner the trustee of the deceased's estate is not liable to pay tax under subsection 855-40(2) of the ITAA 1997.
Subsection 855-40(3) provides:
You are not liable to pay tax as a trustee of a fixed trust in respect of an amount to the extent that the amount gives rise to a *capital gain that is disregarded for a beneficiary under subsection (2).
This ruling applies for the following period:
Year ended 30 June 2022
Year ended 30 June 2023
The scheme commenced on:
1 July 2021
Relevant facts and circumstances
The deceased passed away a couple of years ago, outside of Australia.
The deceased had been a foreign resident for taxation purposes for several years until his death.
The deceased's last will appointed the executor and the trustee of the Will.
The bequeathed entitlements in the assets, which related to all the beneficiaries including the three foreign-resident beneficiaries, were sold by the trustee of the deceased estate.
The will states at 4.01 the Trustee may:
"Apply the whole of the income or capital of my estate to which any beneficiaries are entitled either absolutely or otherwise for his her or their maintenance education or benefit in any manner determined by my Trustee."
The will does not contain any provisions which provide the Trustee with discretionary power to alter the proportion of the distributions between the residuary beneficiaries.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 272-65 of Schedule 2F
Income Tax Assessment Act 1997 subsection 855-40
Income Tax Assessment Act 1997 subsection 995-1