Private ruling: Deceased estate - assessability of income
Published: June 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Question and answer | Is the executor assessable on the interest earned by the estate that was not distributed to the beneficiaries before the estate had been fully administered? | Yes.

Relevant facts and circumstances: Probate was granted in 20XX. The estate was fully administered in 20ZZ. The estate earned interest income in 20YY. The beneficiaries were not presently entitled to some of the interest earned prior to the date of administration.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 99.

Reasons for decision: Summary: Subsection 99(3) of the Income Tax Assessment Act 1936 states: Where there is a part of the net income of a resident trust estate: (a) that is not included in the assessable income of a beneficiary of the trust estate in pursuance of section 97; (b) in respect of which the trustee is not assessed and is not liable to pay tax in pursuance of section 98; and (c) that does not represent income to which a beneficiary is presently entitled that is attributable to a period when the beneficiary was not a resident and is also attributable to sources out of Australia; the trustee shall be assessed and is liable to pay tax on that part of the net income of the trust estate as if it were the income of an individual who was a resident and were not subject to any deduction. Paragraph 9 of Taxation Ruling IT 2622 Income Tax: Present Entitlement during the Stages of Administration of Deceased Estates states: Beneficiaries cannot enjoy present entitlement to income derived by a deceased estate during the administration of the estate. Income of a deceased estate in income years before the administration of the estate is complete, is the income of the executors or administrators and is not income of the beneficiaries. During the initial stage of the administration (as described in paragraph 6 above) no beneficiary is presently entitled to the income derived. In the case of the deceased estate, the amount that was distributed to the beneficiaries after administration was completed in question was interest income earned after probate was granted, and before the administration of the estate was completed. Therefore, the executor is assessable on the amount that was distributed to the beneficiaries after administration was complete.

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