Private ruling: trust distribution
Published: February 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: July 2013

Ruling: Q1: 1. Is the trustee of a testamentary trust liable to pay tax on interest income of the trust estate earned in the 2013-14 financial year where the beneficiary is presently entitled and not under a legal disability? Answer: No 2. Is the beneficiary of a testamentary trust liable to pay tax on a distribution of interest income earned in the 2013-14 financial year when the beneficiary is presently entitled and not under a legal disability? Answer: Yes 3. Is the trustee or beneficiary of a testamentary trust liable to pay tax on a distribution of corpus to the beneficiary? Answer: No

Relevant facts and circumstances: The trustee intends on distributing income and corpus to the beneficiary. The beneficiary is presently entitled and not under a legal disability. Relevant legislative provisions Income Tax Assessment Act 1936 Section 97. Income Tax Assessment Act 1997 Subsection 6-5(2) Income Tax Assessment Act 1936 Subsection 95(1)


Reasons for decision: Summary: The liability to taxation on the net income of a trust is determined under the following sections of the Income Tax Assessment Act 1936 (ITAA1936): • section 97 applies where a beneficiary is presently entitled to a share of the net income and is not under a legal disability • section 98 applies where a beneficiary is presently entitled but is under a legal disability, and • sections 99A and 99 apply where there is an absence of present entitlement of the beneficiary to all or some of the net income of a trust estate.

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