Private ruling: The exercise of the Commissioner's discretion
Date of advice: 10 January 2017
Published: June 2017
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Will the Commissioner exercise discretion under subsection 99A(2) of the Income Tax Assessment Act 1936 (ITAA 1936) in order to assess the trustee of a deceased estate under section 99 of the ITAA 1936? | A1: Yes

Relevant facts and circumstances: The deceased and their spouse passed away on XX February 20XX. The deceased passed away intestate. The deceased estate consisted of life insurance, superannuation death benefits from X different superannuation funds, and a claim from the deceased's spouse's estate. The deceased's sibling, S, was appointed executor of the estate. Lawyers were appointed to administer the estate, and control all trust money. The beneficiaries of the estate are S, and the deceased's relation, N. N was not contactable until 20XX. The estate had no income for years ending 30 June 20XX, 20XX, and 20XX. All income was received by the estate in the years ending 30 June 20XX, and 20XX. No beneficiaries were presently entitled to the income during the incomplete administration period.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 99 | Income Tax Assessment Act 1936 section 99A | Income Tax Assessment Act 1936 section 101

Reasons for decision: Summary: Sections 99 and 99A of the ITAA operate to tax trustees if there is part of the net income of a trust estate that is not taxed to a beneficiary under section 97 or the ITAA or to the trustee under section 98 of the ITAA. Section 99A of the ITAA, which imposes a higher rate of tax, applies automatically unless the trust estate is of a type specified in section 99A(2) of the ITAA and the Commissioner considers that it would be unreasonable for section 99A of the ITAA to apply. A trust estate that results from a will or intestacy is a type of trust estate in respect of which the Commissioner may form an opinion it would be unreasonable for the section to apply. Section 99A(3) of the ITAA sets out factors which the Commissioner can consider in deciding that it would be unreasonable for section 99A of the ITAA to apply. In forming an opinion for the purposes of subsection (2): (a) the Commissioner shall have regard to the circumstances in which and the conditions, if any, upon which, at any time, property (including money) was acquired by or lent to the trust estate, income was derived by the trust estate, benefits were conferred on the trust estate or special rights or privileges were conferred on or attached to property of the trust estate, whether or not the rights or privileges have been exercised; (b) if a person who has, at any time, directly or indirectly: (i) transferred or lent any property (including money) to, or conferred any benefits on, the trust estate; or (ii) conferred or attached any special right or privilege, or done any act or thing, either alone or together with another person or persons, that has resulted in the conferring or attaching of any special right or privilege, on or to property of the trust estate whether or not the right or privilege has been exercised; has not, at any time, directly or indirectly: (iii) transferred or lent any property (including money) to, or conferred any benefits on, another trust estate; or (iv) conferred or attached any special right or privilege, or done any act or thing, either alone or together with another person or persons, that has resulted in the conferring or attaching of any special right or privilege, on or to property of another trust estate, whether or not the right or privilege has been exercised; the Commissioner shall have regard to that fact; and (c) the Commissioner shall have regard to such other matters, if any, as he or she thinks fit. After consideration of these factors, the Commissioner is of the opinion that it would be unreasonable that section 99A of the ITAA should apply in relation to that trust estate to the relevant year of income. Accordingly section 99 of the ITAA will apply.