Private ruling: Trust income - taxed at special rates - section 99A
Date of advice: 8 June 2017
Published: October 2017
Ruling period: Year ended 30 June 2016.
Date scheme commenced: 1 July 2015.

Ruling: Q1: Will the Commissioner exercise his discretion under section 99A of the Income Tax Assessment Act 1936 (ITAA) to tax the trustee on income that no beneficiary is presently entitled to under section 99 of the ITAA? | A1: Yes. After consideration of the factors outlined in subsection 99A(3) of the ITAA 1936, the Commissioner is of the opinion that it would be unreasonable that section 99A of the ITAA 1936 should apply in relation to the Estate in relation to the relevant year of income. Accordingly section 99 of the ITAA 1936 will apply. Further information on the taxation of trusts, including deceased estates, can be found on our website https://www.ato.gov.au by entering Quick Code QC 48243 into the search bar at the top right of the page.

Relevant facts and circumstances: The deceased operated a small business with his/her spouse and child. The business was operated in a partnership structure between the deceased and his/her spouse before they transitioned to a discretionary trust structure. After the deceased’s death, the Trustee elected to distribute the profit of the discretionary trust between the deceased’s estate, his/her spouse individually and his/her child individually. The trust deed allows for a distribution to the executors and/or trustees of a deceased estate of any persons previously defined as a beneficiary. The distribution made to the deceased’s estate was in acknowledgement of drawings and distribution of profit for his/her contribution of services provided for the portion of the financial year while he/she was alive. The deceased’s estate was not wound up until after the distribution was received. There was no beneficiary presently entitled to income or assets of the estate at any part of the financial year in which the distribution was made to the estate.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 99 and | Income Tax Assessment Act 1936 section 99A.