Edited version of private advice

Authorisation Number: 1052230898974

Date of advice: 14 March 2024

Ruling

Subject: Section 99A discretion

Question

To the extent that the trustee is assessable on the net income of the trust, will the Commissioner exercise the discretion to assess the trustee under section 99 of the Income Tax Assessment Act 1936 (ITAA 1936) rather than section 99A?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased was a member of the XXX Superannuation Fund.

The member passed away on XX/XX/20XX after a long illness.

XX months before the deceased's death, the XXX Superannuation Fund cancelled their life insurance policy due to inactivity on the account.

During the XX months of inactivity, the deceased was in and out of hospital and was extremely unwell.

The Estate tried to rectify the cancellation of the policy which led to a prolonged process whereby the XXX Superannuation Fund after agreeing to pay a death benefit on XX/XX/20XX, did not pay the death benefit until a few months later.

The superannuation death benefit is the only income in the deceased estate.

Relevant legislative provisions

Income tax Assessment Act 1936 section 99A (2)

Income Tax Assessment Act 1997 section 302-10

Reasons for decision

Commissioner's discretion under subsection 99A(2) of the ITAA 1936 in relation to deceased estates.

Section 99A of the Income Tax Assessment Act 1936 (ITAA 1936) applies in the case of trust estates of deceased persons unless the Commissioner, pursuant to subsection 99A(2) of the ITAA 1936, forms the opinion that it would be unreasonable for section 99A of the ITAA 1936 to apply in relation to the deceased estate for the particular year of income.

In exercising the discretion, the Commissioner will have reference to the text of the legislation itself, the intent or purpose of the legislation and relevant case law as they apply to the facts and circumstances of a particular case for the purpose of forming the required opinion under subsection 99A(2) of the ITAA 1936.

The types of trust estate in respect of which the Commissioner's discretion may be exercised are listed in paragraphs 99A(2)(a) to (d) of the ITAA 1936 and include a deceased estate (paragraph 99A(2)(a) of the ITAA 1936).

Application to your situation

We have taken the following into consideration when determining whether the Commissioner's discretion will be exercised:

•         The trust is a deceased estate.

•         The only income of the deceased estate is the superannuation death benefit.

•         A superannuation death benefit paid to the trustee of a deceased estate is deemed to be income to which no beneficiary is presently entitled by section 302-10 of the Income Tax Assessment Act 1997.

Having regard to the above matters, and the legislated purpose of section 99A of the ITAA 1936 to prevent the use of trusts for tax avoidance, the Commissioner is of the opinion that it is unreasonable for section 99A of the ITAA 1936 to apply to the trust in respect of the year ending 30 June 20XX.

Therefore, the Commissioner's discretion will be exercised for that income year.