Private ruling: Revocable trusts
Date of advice: 13 September 2024
Published: 28 October 2024
Ruling period: Year ended 30 June 2024
Date scheme commenced: 1 July 2023

Ruling: Q1: Does section 102 of the Income Tax Assessment Act 1936 (ITAA 1936) apply to the income of the trust for the 2023-24 income year? | A1: No. Section 102 of the ITAA 1936 does not apply for the 2023-24 income year because the requirements of neither paragraph 102(1)(a) nor paragraph 102(1)(b) have been met as the settlor passed away prior to the 2023-24 income year and their children were not under 18 years of age during that income year.

Relevant facts and circumstances: X was the owner of the dwelling where they lived with their then spouse, Y. X wished to make provision for Y for Y's lifetime after X's death and for that purpose X settled the trust more than 30 years ago by transferring ownership of the dwelling to the trustee of the trust. The beneficiaries of the trust included the settlor's children and Y. The trust deed provided X a right of occupation of the dwelling during X's lifetime and subsequent to X's death, a right of occupation to Y for Y's lifetime. Under the trust deed, X had the power to direct the trustee and to replace the trustee without the consent of any person. Additionally, the dwelling could not be sold without X's consent. After the establishment of the trust, X continued to live in the dwelling until X's death during the 2022-23 income year. X and Y were no longer in a relationship when X died. The dwelling was not rented out prior to its sale in the 2023-24 income year. The trust has never owned any assets apart from the dwelling and has never engaged in any activities besides simply holding the dwelling. The only income the trust has ever derived is the capital gain on the sale of the dwelling. All of X's children had reached adult age prior to the 2023-24 income year.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 102