Private ruling: Taxation of income of Deceased Estate
Published: June 2012
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014

Ruling: Q1: Will the income to which no beneficiary of the deceased estate is presently entitled be assessed to you as trustee under section 99 of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes

Relevant facts and circumstances: You are the Trustee of a deceased estate. The deceased passed away several years ago. The Will of the deceased provided that income from the estate was to be distributed between a number of beneficiaries. Under the terms of the Will, the Trustee is to retain a portion of the amount available for distribution to some of the beneficiaries. This sum is to be accumulated within the Trust.

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

Reasons for decision: Summary: Sections 99 and 99A of the ITAA 1936 apply to assess a trustee on income to which no beneficiary is presently entitled or income which is retained or accumulated by the trustee. In considering these sections, we must first consider section 99A. Section 99A applies in relation to all trusts unless: - the trust resulted from a will; subparagraph 99A(2)(a)(i) - the trust is bankrupt estate; paragraphs 99A(2)(b) and (c) - the trust is a trust that consists of property referred to in paragraph 102AG(2)(c) · and the Commissioner forms the opinion that it would be unreasonable to apply section 99A in such circumstances Subsection 99A(2) of the ITAA 1936 outlines the circumstances when the Commissioner may apply his discretion for Section 99A not to apply. The relevant part of subsection 99A(2) states that the discretion may be exercised where a trust estate resulted from a will, a codicil or an order of a court that varied or modified the provisions of a will or a codicil. The discretion is exercised where the Commissioner is of the opinion that it would be unreasonable for Section 99A to apply. Consequently, the favourable exercise of the Commissioner's discretion under subsection 99A(2) means the highest rate of income tax does not apply to trust estates resulting from a will, codicil, etc. These include both the estate of a deceased person and testamentary trusts established pursuant to the terms of a will. In order for a trust to result from a will, it is necessary that the will should be the source of the funds and that the trust should be created in consequence of a provision in the will or court order itself (C ase P53 82 ATC 247; (1982) 25 CTBR (NS) Case 115 ). | Detailed Reasoning - In your case: As the Estate was created in consequence of a will, the discretion under subsection 99A(2) of the ITAA 1936 is exercised to assess the income of the trust in accordance with Section 99 of the ITAA 1936

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