Private ruling: Commissioner's discretion
Date of advice: 15 January 2026
Published: 2 March 2026

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 99A(2) of the ITAA 1936 so that the trustee of the Testamentary Trust is assessed and liable to pay tax under section 99 of the ITAA 1936 on the share of the net income of the Testamentary Trust referable to the trust income to which no beneficiary is presently entitled? | A1: No. Facts On XX October 20XX Person A's (the deceased's) spouse Person B passed away. Person A and Person B had Mutual Wills that were beneficial to their child (Person C A) and their child (Person D). Person C A lives with a lifelong disability and has an appointed guardian, and the Public Trustees are their appointed administrators. Person A was appointed executor and trustee of Person B's estate and Probate was granted XX April 20XX. Person A was appointed trustee of the two Testamentary Trusts formed under Person B's Will for the adult children, beneficiaries. The primary beneficiaries of the Will were: 1. The (Person C A) Testamentary Trust formed under the Will. 2. The (Person D) Testamentary Trust formed under the Will. Bequests to the primary beneficiaries under the Will: Testamentary Trust - remaining funds in the Person B Superannuation Fund, investment accounts and term deposits, 50% share of the amounts owing from the 'Person A Family Trust' (these amounts are not an asset of the deceased at the date of death) and 60% of the residual of the estate. Testamentary Trust - 50% share of the amounts owing from the 'Person A Family Trust' (these amounts are not an asset of the deceased at the date of death) and 40% of the residual of the estate. Person A remained trustee of both estates until his health resulted in diminished capacity in 20XX at which time the Public Trustees were appointed as administrators for Person A. At the time of diminished capacity Person A did not have and enduring power of attorney. Subsequently administration of the 'Person A Family Trust', trusts lapsed including distributions and taxation obligations, until Person A passed away on XX June 20XX. XX February 20XX Public Trustees initiated litigation proceedings on behalf of beneficiary Person C A. Person A's Estate administration and associated litigation proceedings have been subject to three legal representatives in the period between the date of the deceased's death and the current representative obtaining probate. Person D in their capacity as executor and others under Person A's Will were granted probate XX March 20XX. At this time Person D under operation of clauses 3.4.1 and 3.4.2 of Person B's Will also became trustee of the two Testamentary Trusts formed under that Will. There is an arrangement under the current representative for the parties to do all things necessary to enable the respective trusts to update the matters of the trusts and lodge all outstanding taxation obligations. Reflective of the Will the primary beneficiaries of Will are: 1. XXXX - preceded Person A. 2. The (Person C A) Testamentary Trust (2) formed under XX Will. 3. The (Person D) Testamentary Trust (2) formed under XX Will. This is notwithstanding there is provision under paragraph 4.10 of Person A's Will that beneficial amounts relating to the trusts, can at the discretion of trustees be added to the testamentary trusts previously formed under the Will. Bequests to the primary beneficiaries under Will: XXXX - Preceded the deceased. Person C A - personal effects. Person D - personal effects. General Trustees (Person D, XXXXXXX) - Motor vehicle and shares in XXXX. Testamentary Trust - balance of pension amounts, investment portfolio No XX and motor vehicles, amounts owing from 'Person A Family Trust' (these amounts are not an asset of the deceased at the date of death) and 60% of the residual of the estate. Testamentary Trust - amounts owing from 'Person A Family Trust' (these amounts are not an asset of the deceased at the date of death) and 40% of the residual of the estate. Explanation In this case the requirements of subsection 99A(3A) of the Income Tax Assessment Act 1936 (ITAA 1936) are not met. Because, if bequests from the estate of Person A are added to the trust. Testamentary Trusts, these are not assets owned by XX (the first deceased) at the time of their death. This is because the assets of the existing Testamentary Trust are being augmented by assets that were not owned by the First Deceased or (cannot be traced to those assets). In order for the discretion in subsection 99A(2) to apply the assets of the testamentary trust must be assets owned by the deceased at the date of their death. Therefore, the proposed scheme is considered by the Commissioner to be outside the purpose for which section 99 of the ITAA 1936 was maintained in the ITAA 1936. Consequently, in the absence of any material factors pointing away from that conclusion the Commissioner will not exercise their discretion in subsection 99A(2).