Edited version of private advice

Authorisation Number: 1052239385383

Date of advice: 8 April 2024

Ruling

Subject: Section 99A discretion

Question

Will the Commissioner exercise his discretion under subdivision 99A(2) of the Income Tax Assessment Act 1936 (ITAA 1936) to apply progressive rates of tax as per section 99 of the ITAA 1936?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The testamentary trust was created under the Will of the deceased.

The deceased passed away on XX/XX/20XX.

A copy of the Will has been provided.

The purpose of the Trust is to share XX's residuary estate which includes XX% distribution of the trust in the XXXX Trust.

All the assets in the trust are held for investment purpose and for the sole benefit of the beneficiaries under the terms of the Will Clause XX(X).

No loans have been made to and from the Trust.

No person has directly or indirectly transferred money or property to the trust.

The beneficiaries are defined by clause XX of the Will.

There are no other trusts that XX or any beneficiary of the trust has contributed in the ways mentioned in a clause of the Will.

There has never been an arrangement where property has been transferred to the trust by a relative to the beneficiaries.

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)

Reasons for decision

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 includes a trust estate that has resulted from a Will (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 testamentary trust was created under a Will.

•         The trust only includes property vested in the Trustee as a result of the deceased's Will.

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 years ending 30 June 20XX to 30 June 20XX.

Therefore, the Commissioner's discretion will be exercised for the relevant income years.