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Edited version of private advice
Authorisation Number: 1052370087502
Date of advice: 14 March 2025
Ruling
Subject: Commissioner's discretion - section 99A
Question 1
Would 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 to, under section 99 of the ITAA 1936?
Answer 1
Yes.
After consideration of the relevant factors, we accept that the testamentary trust has not been utilised in a manner for the purpose of avoiding tax. The Commissioner is of the opinion that it would be unreasonable that section 99A of the ITAA 1936 should apply in relation to the trustee of the trust for the relevant income year. Accordingly, section 99 of the ITAA 1936 would apply.
This ruling applies for the following period:
Year ending 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
The deceased passed away on XX/XX/20XX.
The deceased had a Will.
The net value of the estate as disclosed in the statement of assets and liabilities was $X.
The deceased's Will provided for the sum of $Y to be held in a testamentary trust created under the will until the beneficiary reached a specified age.
The Will provides that the trustee of a testamentary trust created under the Will may accumulate the income of the testamentary trust.
On XX/XX/20XX, the testamentary trust was created as per the terms of the Will.
The amount of $Y has been deposited in a term deposit account for the Trust.
Property held by the Trustee of the Trust (the Trustee) consists only of:
(i) property listed in the Inventory of Property annexed to the Grant of Probate document that vested in the Trustee under the terms of the Last Will and Testament of the deceased individual;
(ii) property that represents accumulations of income or capital from property that satisfies the requirement in (i);
(iii) property from the sale of these assets of the Estate; and
(iv) property from the re-investment of property that satisfies the requirement in (iii)
The assets of the Trust consist only of:
• cash in a term deposit
The deceased was an object of a discretionary trust. There were no distributions to the deceased in the last five years prior to their passing.
The Trust has no unpaid present entitlements.
The beneficiary of the Trust has not reached the required age specified in the Will.
The Trustee will accumulate the income earned by the Trust in the year ending 30 June 20XX.
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)