Private ruling: Deceased estate
Date of advice: 15 April 2026
Published: 13 July 2026
Ruling period: From 1 July 20XX to 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion under subsection 99A(2) of the Income Tax Assessment Act 1936 (ITAA 1936) to tax the Executor of the Estate (Executor) on the income that no beneficiary of the deceased estate is presently entitled to under section 99 of the ITAA 1936 for the 20XX, 20XX and 20XX income years? | A1: Yes. | Q2: Does a CGT event happen when the Executor distributes the cash to the Beneficiaries of the deceased estate pursuant to the Australian Will? | A2: No. | Q3: Will Beneficiaries include any amount of the cash they receive, or will receive, pursuant to the Australian Will in their assessable income under section 97 of the ITAA 1936, section 99B of the ITAA 1936 or section 6-5 Income Tax Assessment Act 1997 (ITAA 1997)? | A3: No. | Q4: Will the capital gain made on the sale of the Property by the Executor be disregarded under subsection 118-195(1) of the ITAA 1997? | A4: Yes. | Q5: Will any capital gains made by the Executor when the Australian Shares are sold be discount capital gains under section 115-5 of the ITAA 1997? | A5: Yes. | Q6: Will the Executor include any capital gain or capital loss made from the disposal of the coins (the Coins) in the assessable income of the deceased estate in the 20XX income year? | A6: Yes. | Q7: Will any capital gains or capital losses made by the Estate when the Personal Effects are distributed to Beneficiaries that are Australian residents pursuant to the Australian Will be disregarded under either subsection 118-10(1), subsection 118-10(3) or subsection 128-15(3) of the ITAA 1997? | A7: Yes. | Q8: Will any capital gains or capital losses made by the Estate when the Personal Effects are distributed to Beneficiaries that are foreign residents pursuant to the Australian Will be included in the Estate's assessable income? | A8: No. | Q9: Will any capital gain or capital loss made by the Estate when the Executor distributes the Artworks to the Beneficiaries under the Australian Will be included in the Estate's assessable income? | A9: No. | Q10: For all income years from the establishment of the Foreign Trust to the Date of Death, was the Deceased: (a) absolutely entitled to the Foreign Trust Assets under section 106-50 of the ITAA 1997? and (b) presently entitled to the income of the Foreign Trust under subparagraph 97(1)(a)(i) of the ITAA 1936? | A10: (a) yes (b) yes | Q11: Will any capital gain or capital loss be made by the Deceased at the Date of Death in respect of Deceased's interest in the Foreign Trust? | A11: No. | Q12: Was the Foreign Trust at any time: (a) a 'resident trust estate' for the purposes of Division 6 of the ITAA 1936? (b) a 'resident trust for CGT purposes' under the ITAA 1936 and ITAA 1997? subject to the tax residency articles in the Double Tax Agreement between Australia and a foreign jurisdiction. | A12: (a) yes (b) yes | Q13: Does CGT event I2 under subsection 104-170(1) of the ITAA 1997 happen in relation to the Foreign Trust on the Date of Death? | A13: No. | Q14: If there are any capital gains that arise when CGT event I2 happens, are these capital gains disregarded under section 855-40 of the ITAA 1997? | A14: No. | Q15: Is the Executor's personal liability under section 254 of the ITAA 1936 only in respect of income tax assessed to the Estate for the 20XX and 20XX income years in respect of the assessable income derived by the Executor in these income years, which is expected to be: (a) dividend income (b) interest income (c) net capital gains from sale of the Australian Shares and the Coins? | A15: Yes.

Relevant facts and circumstances: 1. On XX/XX/20XX (the Date of Death), the Deceased passed away. 2. On XX/XX/20XX, probate was granted to the Executor in respect of the Australian Will. 3. On XX/XX/20XX, all the Coins were sold. The capital proceeds received from the sale of the Coins totalled $XX,XXX. 4. On XX/XX/XXXX, the Executor distributed part of the cash held in the estate to the beneficiaries pursuant to the Australian Will. The Will 5. The Australian Will provides for a number of specific bequests, including a number of monetary and non-monetary gifts. The residuary of the Estate is to pass to 2 foreign residents. 6. The Deceased's Australian assets include the property, cash, share investments, and Personal Effects and collectables. Sale of the Property 7. The Property was purchased by the Deceased after 20 September 1985. 8. On XX/XX/20XX, the Executor signed a contract of sale for the Property and the sale settled on XX/XX/20XX. Sale of the Shares 9. On XX/XX/XXXX, the Executor sold the Australian Shares held in the Estate that were all acquired after 20 September 1985. 10. The Deceased had a separate Foreign Will that provided for all their property situated in the foreign jurisdiction with a separate Executor. Artworks 11. The Deceased owned X pieces of Artwork just before their death: (a) a piece of artwork was purchased for $X,XXX on XX/XX/XXXX and the market value on the Date of Death was $X,XXX, and (b) another piece of artwork was purchased for $X,XXX on XX/XX/XXXX and the market value on the Date of Death was $X,XXX. The Foreign Trust 12. A Foreign Trust was established by the Deceased before 20 September 1985, however the trust deed was amended on a number of occasions post 20 September 1985. 13. During the Deceased lifetime the trustee was required to pay all the net income and so much of trust capital as the Deceased may from time to time direct in writing. 14. On the Date of Death, the trustee was to distribute the residuary of the trust estate to 2 specified individuals, that are foreign residents. 15. The Deceased's beneficial interest in the assets of the Foreign Trust expired on their Date of Death. 16. The Deceased and the Corporate Trustee domiciled in a foreign jurisdiction were co trustees of the Foreign Trust. 17. On XX/XX/20XX, the 2 specified individuals became co-trustees with the Corporate Trustee of the Foreign Trust. 18. Pursuant to the Deceased's entitlements as a beneficiary of the Foreign Trust, the Trustee: (a) distributed all the income of the Foreign Trust to the Deceased, and (b) made capital distributions from time to time to the Deceased. Note: The Deceased included all income (including capital gains) received from the Foreign Trust in their Australian income tax returns. Assumption 19. For the purpose of making the private ruling, it has been agreed the Deceased acquired each of the Coins after 20 September 1985, and each Coin has a nil cost base.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1936 Division 6 | Income Tax Assessment Act 1936 subsection 95(2) | Income Tax Assessment Act 1936 section 97 | Income Tax Assessment Act 1936 subsection 97(1) | Income Tax Assessment Act 1936 section 99 | Income Tax Assessment Act 1936 section 99A | Income Tax Assessment Act 1936 subsection 99A(2) | Income Tax Assessment Act 1936 subparagraph 99A(2)(a)(i) | Income Tax Assessment Act 1936 paragraph 99A(2)(b) | Income Tax Assessment Act 1936 paragraph 99A(2)(c) | Income Tax Assessment Act 1936 section 99B | Income Tax Assessment Act 1936 paragraph 102AG(2)(c) | Income Tax Assessment Act 1936 section 254 | Income Tax Assessment Act 1936 paragraph 254(1)(d) | Income Tax Assessment Act 1936 paragraph 254(1)(e) | Income Tax Assessment Act 1936 Schedule 2F subsection 272-5(1) | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 subsection 102-5(1) | Income Tax Assessment Act 1997 subsection 104-10(1) | Income Tax Assessment Act 1997 subsection 104-10(2) | Income Tax Assessment Act 1997 subsection 104-10(3) | Income Tax Assessment Act 1997 subsection 104-10(4) | Income Tax Assessment Act 1997 section 104-25 | Income Tax Assessment Act 1997 section 104-170 | Income Tax Assessment Act 1997 subsection 104-170(1) | Income Tax Assessment Act 1997 paragraph 104-215(1)(c) | Income Tax Assessment Act 1997 subsection 104-215(2) | Income Tax Assessment Act 1997 subsection 104-215(3) | Income Tax Assessment Act 1997 subsection 104-215(5) | Income Tax Assessment Act 1997 subsection 106-50 | Income Tax Assessment Act 1997 subsection 108-5(1) | Income Tax Assessment Act 1997 subsection 108-10(1) | Income Tax Assessment Act 1997 subsection 108-10(2) | Income Tax Assessment Act 1997 paragraph 108-10(2)(a) | Income Tax Assessment Act 1997 subsection 108-20(1) | Income Tax Assessment Act 1997 subsection 108-20(2) | Income Tax Assessment Act 1997 section 115-5 | Income Tax Assessment Act 1997 section 115-10 | Income Tax Assessment Act 1997 section 115-15 | Income Tax Assessment Act 1997 section 115-20 | Income Tax Assessment Act 1997 section 115-25 | Income Tax Assessment Act 1997 subparagraph 115-100(a)(ii) | Income Tax Assessment Act 1997 subsection 118-10(1) | Income Tax Assessment Act 1997 subsection 118-10(3) | Income Tax Assessment Act 1997 subsection 118-195(1) | Income Tax Assessment Act 1997 paragraph 118-195(1)(b) | Income Tax Assessment Act 1997 subsection 121-20(5) | Income Tax Assessment Act 1997 section 128-10 | Income Tax Assessment Act 1997 subsection 128-15(2) | Income Tax Assessment Act 1997 subsection 128-15(3) | Income Tax Assessment Act 1997 subsection 128-20(1) | Income Tax Assessment Act 1997 subsection 128-20(2) | Income Tax Assessment Act 1997 section 855-40 | Income Tax Assessment Act 1997 subsection 855-40(2) | Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision: Summary: After considering the information provided, the Commissioner will exercise the discretion under subsection 99A(2) of the ITAA 1936 to assess the Executor on the income of the deceased estate as if it was income of an individual under section 99 of the ITAA 1936. | Detailed Reasoning - Detailed reasoning: 1. Sections 99 and 99A of the ITAA 1936 apply to assess the Trustee on income to which no beneficiary is presently entitled, which is retained or accumulated by the Trustee. In considering these sections, we must first consider section 99A. 2. Section 99A of the ITAA 1936 applies in relation to all trusts unless: (a) the trust is a deceased estate: subparagraph 99A(2)(a)(i) and (ii) of the ITAA 1936 (b) the trust is a bankrupt estate: paragraphs 99A(2)(b) and (c) of the ITAA 1936 (c) the trust is a trust that consists of property referred to in paragraph 102AG(2)(c) of the ITAA 1936. and the Commissioner is of the opinion that it would be unreasonable for this section to apply in relation to the trust estate in relation to relevant income year. 3. Subsection 99A(2) of the ITAA 1936 outlines that in forming that opinion the Commissioner shall have regard to: (a) the circumstances in which and the conditions if any, upon which, at any time, the 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 these rights or privileges have been exercised, and. (b) any other matters if any that he or she thinks fit. 4. Paragraph 9 in Taxation Ruling IT 2622 Income tax: present entitlement during the stages of administration of deceased estates states: Beneficiaries cannot enjoy present entitlement to income derived by a deceased estate during the administration of the estate. Income of the deceased estate in income years before the administration of the estate is complete, is the income of the executors or administrators and is not income of the beneficiaries. During the initial stage of administration (as described in paragraph 6 above) no beneficiary is presently entitled to the income derived. 5. As the Deceased died on XX/XX/20XX and the Executors are still in the initial stage of the administration phase of the Estate, the Commissioner is of the opinion that it is appropriate to exercise the discretion under subsection 99A(2) of the ITAA 1936 to tax the income of the deceased estate to which no beneficiary is presently entitled at the section 99 of the ITAA 1936 rate rather than the rate imposed because of the operation of section 99A of the ITAA 1936 for the 20XX, 20XX and 20XX income years. | Detailed Reasoning - Question 2: Does a CGT event happen when the Executor distributes the cash to the Beneficiaries of the deceased estate pursuant to the Will? | Summary: CGT event A1 under subsection 104-10(1) of the ITAA 1997 happens when the Executor distributes the cash to the Beneficiaries of the deceased estate pursuant to the Will. | Detailed Reasoning - Detailed reasoning: 6. Subsection 108-5(1) of the ITAA 1997 provides that a CGT asset is: (a) any kind of property; or (b) a legal or equitable right that is not property. 7. In Taxation Determination TD 2002/25: Income tax: capital gains: is Australian currency a CGT asset under section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997) if it is used as legal tender to facilitate a transaction? where Australian currency is used as legal tender to facilitate a transaction it is not a CGT asset. 8. A note in TD 2002/25 says the Determination does not deal with the question as to whether Australian currency is a CGT asset in other circumstances. 9. In Taxation Ruling IT 2584 Income Tax: capital gains: exemption of certain gains and losses: betting and lottery winnings , paragraph 9 states: In the case of the disposal of money winnings, no capital gain or capital loss will normally accrue because the consideration in respect of the disposal is the same as the deemed consideration in respect of the acquisition of the money. 10. The cash distributed by the Executor is a CGT asset, as it is property and CGT event A1 under subsection 104-10(1) of the ITAA 1997 happens when the Executor distributes the cash to the Beneficiaries of the deceased estate pursuant to the Australian Will. However, the distribution of Australian currency to beneficiaries by the Executor will not accrue a capital gain or a capital loss to the deceased estate as the consideration in respect of the distribution to the Beneficiaries will be the same as the deemed consideration in respect of the acquisition of the Australian currency by the Estate. | Detailed Reasoning - Question 3: Will Beneficiaries include any amount of the cash they receive, or will receive, pursuant to the Will in their assessable income under section 97 of the ITAA 1936, section 99B of the ITAA 1936 or section 6-5 of the ITAA 1997? | Summary: No, as the distributions of the cash represents distribution of corpus of the deceased estate and not income of the deceased estate. | Detailed Reasoning - Detailed reasoning: 11. On the death of person, the property of the deceased person passes to their estate, legal control over which is exercised by an executor or administrator. 12. You advised the cash forms part of the corpus of the deceased estate representing the Deceased's savings, proceeds from the sale of the Property, the Australian Shares and Coins (noting the Executor has been, or will be, assessed on any capital gains made on the sale of the shares and gold coins). 13. Accordingly, no amounts of the distributions by the Executor of cash to the Beneficiaries of the Estate will be included in their assessable income, or that of the deceased estate, under sections 97 or 99B of the ITAA 1936 or section 6-5 of the ITAA 1997 as the distributions of the cash represents distribution of corpus of the deceased estate and not income of the deceased estate. | Detailed Reasoning - Question 4: Will the capital gain made on the sale of the Property by the Executor be disregarded under subsection 118-195(1) of the ITAA 1997? | Summary: CGT event A1 happened when the Property was sold in the 20XX income year. As the Property was sold within 2 years of the Deceased's death, the capital gain made by the Executor will be disregarded under subsection 118-195(1) of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: 14. Subsection 104-10(1) of the ITAA 1997 provides that CGT event A1 happens if you dispose of a CGT asset. 15. The Property falls within the definition of a CGT asset, as it is property. [1] 16. Subsection 104-10(2) of the ITAA 1997 provides that you dispose of CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur if you stop being the legal owner of the asset but continue to be its beneficial owner. 17. Consequently, as settlement of the sale of Property occurred on XX/XX/20XX there was a change in ownership of the property from the Executor to the Purchaser. 18. The time of the event happened when the contract to sell the Property was entered into, or if no contract was entered into, when the change in ownership happened. [2] You advised the Executor entered into a contract of sale for the Property on XX/XX/20XX. 19. Subsection 118-195(1) of the ITAA 1997 provides that a capital gain or capital loss you make from a CGT event that happens in relation to a dwelling or your ownership interest in it is disregarded if: • you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as a trustee of a deceased estate, and • at least one of the items in column 2 and at least one of the items in column 3 of the table, under paragraph 118-195(1)(b), are satisfied. 20. The Property: • was acquired by the Deceased after 20 September 1985 • was the Deceased's main residence just before their death and was not then being used for the purpose of producing assessable income • devolved to the Executor once probate was granted, and • was sold by the Executor on XX/XX/2025, which is within 2 years of the Deceased's death. 21. Accordingly, any capital gain made by the Executor from the disposal of the Property is disregarded under subsection 118-195(1) of the ITAA 1997. | Detailed Reasoning - Question 5: Will any capital gains made by the Executor when the Australian Shares are sold be a discount capital gain under section 115-5 of the ITAA 1997? | Summary: The capital gains and capital losses are made on the disposal of the Australian Shares. The capital gain made are to be reduced by the capital loss made in the 20XX income year. The net capital gain made by the Executor meets the requirements to be a discount capital gain and the discount percentage that is applicable is 50%. | Detailed Reasoning - Detailed reasoning: 22. CGT event A1 in subsection 104-10(1) of the ITAA 1997 happens if you dispose of a CGT asset. 23. The Shares falls within the definition of a CGT asset, as it is property. [3] 24. You dispose of a CGT asset if a change in ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change in ownership does not occur if you stop being the legal owner of the asset but continues to be its beneficial owner. [4] 25. The Executor sold the Australian Shares using a Broker. The orders were executed on XX/XX/20XX, with a settlement date of XX/XX/20XX. 26. Accordingly, CGT event A1 happened in relation to each of the Australian Shares sold as the ownership of the shares transferred from the Executor to the purchasers on XX/XX/20XX. The time the event occurred is when orders were placed on the market by the broker to sell the Australian Shares. [5] 27. Subsection 104-10(4) of the ITAA 1997 provides you make a capital gain from CGT event A1 if the capital proceeds from the event are more than the asset's cost base. However, you make a capital loss if the capital proceeds are less than the asset's reduced cost base. A net capital gain was made from the sale of the Australian Shares. 28. Whether the capital gains made from the disposal of the Australian Shares on XX/XX/20XX are eligible for the 50% CGT discount, is dependent on whether a discount capital gain was made. 29. Section 115-5 of the ITAA 1997 states a discount capital gain is a capital gain that meets requirements in sections 115-10, 115-15, 115-20 and 115-25. The capital gains made from the disposal of the Australian Shares are discount capital gains for the following reasons: (a) the deceased estate is a trust satisfying the requirement in section 115-10 (b) CGT event A1 happened on XX/XX20XX when the Australian Shares were sold, satisfying the requirement in section 115-15 (c) no indexation was applied in working out the cost base of the Australian Shares sold, satisfying the requirement in section 115-20, and (d) the Australian Shares were all acquired by the Executor at least 12 months before XX/XX/20XX satisfying the requirement in section 115-25. 30. As the Australian Shares were sold by the Executor (a trustee of a deceased estate), the discount percentage that is applicable to the discount capital gains made on the disposal of these shares is 50%. [6] 31. However, before the 50% discount percentage is applied, the capital gains made during the 20XX income year must be reduced by the capital losses made during the 20XX income year, and any previously unapplied net capital losses from earlier income years. [7] Based on the information provided, the 50% discount percentage is to be applied to the total net capital gain of $XXX,XXX.XX. | Detailed Reasoning - Question 6: Will the Executor include any capital gain or capital loss made from the disposal of the Coins in the assessable income of the Deceased Estate in the 20XX income year? | Summary: The Executor will need to include the capital gain made from the disposal of each of the Coins in the assessable income of the Estate in the 20XX income year. | Detailed Reasoning - Detailed reasoning: 32. CGT event A1 in subsection 104-10(1) of the ITAA 1997 happens if you dispose of a CGT asset. 33. Each of the Coins is a CGT asset, as it is property. [8] 34. Subsection 108-10(2) of the ITAA 1997 states: A collectable is: (a) artwork, jewellery, an antique, or a coin or medallion; or (b) a rare folio, manuscript or book; or (c) a postage stamp or first day cover; that is used or kept mainly for you (or your associate's) personal use or enjoyment. 35. Consequently, each of the Coins listed in the Will is a collectable. 36. You dispose of a CGT asset if a change in ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change in ownership does not occur if you stop being the legal owner of the asset but continues to be its beneficial owner. [9] 37. Consequently, CGT event A1 happened to each of the Coins when the Executor sold them. 38. Subsection 104-10(4) of the ITAA 1997 provides that you make a capital gain from CGT event A1 if the capital proceeds from the event are more than the asset's cost base. However, you make a capital loss if the capital proceeds are less than the asset's reduced cost base. 39. Subsection 118-10(1) of the ITAA 1997 states: A capital gain or capital loss you make from a collectable is disregarded if the first element of its cost base, or the first element of its cost if it is a depreciating asset, is $500 or less. 40. The Executor has agreed for each of the Coins to be treated as being acquired after 20 September 1985 and have a nil cost base attributed, because: (a) no records could be located to substantiate when each of the Coins were acquired by the Deceased and their cost bases at the time of the Deceased's death, and (b) it is not possible to reconstruct the records as provided in subsection 121-20(5) of the ITAA 1997, to substantiate the acquisition date of for each of the Coins by the Deceased and their associated cost bases. 41. The Executor because of their inability to substantiate the acquisition date and cost bases of the Coins on the Date of Death, have agreed to make the assumption that attributes no cost base to the Coins for the purpose of calculating the capital gain made on their disposal. 42. The assumption is not made to bring into operation subsection 118-10(1) of the ITAA 1997 to disregard any capital gain made due to the cost base of the Coins being $X or less. 43. Subsection 128-15(2) of the ITAA 1997 provides that the Executor is taken to have acquired the asset on the day the Deceased died. Therefore, the Executor is deemed to have acquired each Coin on XX/XX/20XX for nil consideration. When the Coins were sold on XX/XX/20XX, a capital gain was made for each Coin sold. The capital gains made on the sale of the Coins totalling $XX,XXX will be a discount capital gain as all the requirements in section 115-5 of the ITAA 1997 are satisfied. 44. Accordingly, the Estate will need to include all discount capital gains totalling $XX,XXX from the disposal of the Coins under the method statement [10] calculated on the bases on the assumption of a nil cost base being attributed to the Coins. | Detailed Reasoning - Question 7: Will any capital gains or capital losses made by the Estate when the Personal Effects are distributed to the Beneficiaries that are Australian residents pursuant to the Australian Will be disregarded under either subsection 118-10(1), subsection 118-10(3) or subsection 128-15(3) of the ITAA 1997? | Summary: Where the conditions in subsections 118-10(1) and (3) of the ITAA 1997 are met, any capital gain or capital loss made when the Personal Effects are distributed to the Beneficiaries who are Australian residents is to be disregarded. However, where the conditions are not met, then subsection 128-15(3) of the ITAA 1997 will apply to disregard any capital gain or capital loss made by the Executor passing these assets to these Beneficiaries. | Detailed Reasoning - Detailed reasoning: 45. All the items referred to Personal Effects in the Australian Will fall within the definition of a collectable or a personal use asset. 46. All items of jewellery listed in the Australian Will are collectables pursuant to paragraph 108-10(2)(a) of the ITAA 1997. 47. Subsection 108-20(2) of the ITAA 1997 states: A personal use asset is: (a) a CGT asset (except a collectable) that is used or kept mainly for you (or your associate's) personal use or enjoyment, or (b) an option or right to acquire a CGT asset of that kind; or (c) a debt arising from a CGT asset in which the CGT asset the subject of the event was one covered by paragraph (a); or (d) a debt arising from other than: (i) in the course of gaining or producing your assessable income; or (ii) from your carrying on a business. 48. All the Personal Effects, like dishes, albums, photographs listed Will that are not jewellery are considered a personal use asset. 49. Subsection 118-10(1) of the ITAA 1997 states: A capital gain or capital loss you make from a collectable is disregarded if the first element of its cost base, or the first element of its cost if it is a depreciating asset, is $500 or less. 50. Subsection 118-10(3) of the ITAA 1997 states: A capital gain you make from a personal use asset, or part of the asset, is disregarded if the first element of the asset's cost base, or the first element of its cost if it is a depreciating asset, is $10,000 or less. 51. Where the conditions in subsections 118-10(1) or (3) of the ITAA 1997 are met, any capital gain or capital loss made by the Executor in respect of the distribution of a collectable or personal use asset to the Beneficiaries who are Australian residents are to be disregarded. 52. However, where the conditions are not met, then subsection 128-15(3) of the ITAA 1997 will apply to disregard any capital gain or capital loss made by the Executor passing these assets to these Beneficiaries. | Detailed Reasoning - Question 8: Will any capital gains or capital losses made by the Estate when the Personal Effects are distributed to the PE Beneficiaries who are foreign residents pursuant to the Australian Will be included in the Estate's assessable income? | Summary: Any capital gain or capital loss made that are not disregarded when the Personal Effects are distributed to the Beneficiaries under the Australian Will who are foreign residents are to be included in the Deceased's final Date of Death income tax return and not in the Estate's assessable income. | Detailed Reasoning - Detailed reasoning: 53. CGT event K3 in paragraph 104-215(1)(c) of the ITAA 1997 happens if you die and a CGT asset you owned just before dying passes to a beneficiary in your estate who (when the asset passes) is a foreign resident. 54. Subsection 995-1(1) of the ITAA 1997 states: " passes ": a CGT asset passes to a beneficiary in an individual's estate in the way described in section 128-20. 55. Subsection 128-20(1) of the ITAA 1997 states: A CGT asset passes to a beneficiary in the Deceased estate' if the beneficiary becomes the owner of the asset: (a) under a will, or that will as varied by a court order; or (b) by operation of an intestacy law, or such a law as varied by a court order, or (c) because it is appropriated to be beneficiary by your legal personal representative in satisfaction of a pecuniary legacy or some other interest or share in your estate; or (d) under a deed of arrangement if: (i) the beneficiary entered into the deed to settle a claim to participate in the distribution of your estate; and (ii) any consideration given by the beneficiary for the asset consisted only of the variation or wavier of a claim to one or more CGT asset that form part of your estate. 56. Subsection 128-20(2) of the ITAA 1997 states: A CGT asset does not pass to a beneficiary in the Deceased's estate if the beneficiary becomes the owner of the asset because your legal personal representative transfers it under a power of sale. 57. Subsection 104-215(2) of the ITAA 1997 states: If the asset passes to a beneficiary who is a foreign resident, CGT event K3 happens only if: (a) you were an Australian resident just before dying; and (b) the asset (in the hands of the beneficiary) is not taxable real Australian property. 58. Specific assets were distributed to various foreign resident beneficiaries under the Australian Will. 59. CGT event K3 will happen in respect of these CGT assets as the: (a) Deceased was an Australian resident just before dying (b) Personal Effects pass to foreign residents under the Australian Will, and (c) Personal Effects are not 'taxable Australian property within the meaning of section 855-15 of the ITAA 1997. 60. As previously determined, the Personal Effects are either a collectable or a personal use asset. Therefore, any capital gain or capital loss made from the Personal Effects, that are not disregarded, is not to be included in the Estate's assessable income but is to be included in the Deceased's final Date of Death income tax return. 61. Any capital gain or capital loss made from the Personal Effects is to be disregarded where one of the following applies: (a) the CGT asset was acquired by the Deceased before 20 September 1985 [11] (b) it is a collectable and the first element of the cost base is $500 or less [12] (c) it is a personal use asset and was acquired for $10,000 or less, [13] or (d) any capital loss made from a personal use asset is disregarded. [14] | Detailed Reasoning - Question 9: Will any capital gain or loss made by the Estate when the Executor distributes the Artworks to the Artwork Beneficiaries under the Australian Will be included in the Estate's assessable income? | Summary: When the Executor passes the Artworks to the Beneficiaries that are foreign residents, CGT event K3 happens as they are both foreign residents. The capital gain made in relation to the Artworks will need to be included in the Deceased's final Date of Death income tax return. | Detailed Reasoning - Detailed reasoning: 62. CGT event K3 in paragraph 104-215(1)(c) of the ITAA 1997 happens if you die and a CGT asset you owned just before dying passes to a beneficiary in your estate who (when the asset passes) is a foreign resident. 63. The Deceased owned X pieces of Artwork just before their death, that were both acquired after 19 September 1985 for more than $500 dollars. 64. These Artworks have or will be passed by the Executor to beneficiaries of the Australian Will who are foreign residents. 65. As previously mentioned, the term collectable includes artwork. [15] 66. As both Artworks were acquired by the Deceased for more than $500, any capital gain or capital loss made from the transfer of the Artworks will not be disregarded under subsection 118-10(3) of the ITAA 1997. 67. Accordingly, the capital gains made when CGT event K3 happened will need to be considered using the method statement [16] and included in the assessable income in Deceased's final Date of Death income tax return. | Detailed Reasoning - Question 10: For all income years from the establishment of the Foreign Trust to the Date of Death, was the Deceased: (a) absolutely entitled to the Foreign Trust assets under section 106-50 of the ITAA 1997, and (b) presently entitled to the income of the Foreign Trust under subparagraph 97(1)(a)(i) of the ITAA 1936? | Summary: (a) The Deceased was not absolutely entitled to the assets of the Foreign Trust pursuant to section 106-50 of the ITAA 1997 from the establishment of the Foreign Trust until their death. (b) The Deceased will be presently entitled to all net income earned by the Foreign Trust in all the income years before their death, including the income derived by the Foreign Trust before their death in the income year that their death occurred. | Detailed Reasoning - Detailed reasoning: 68. Section 106-50 of the ITAA 1997 ensures that, just after a beneficiary becomes absolutely entitled to an asset of a trust (disregarding any legal disability), the asset is treated as an asset of the absolutely entitled beneficiary (and not an asset of the trustee) for the purpose of the CGT and connected entity provisions. In conjunction with treating any acts done by the trustee as being done by the absolutely entitled beneficiary, this has the effect that everything that happens to, or in respect of, the asset is taken into account in working out any CGT consequences in respect of that asset in the hands of the beneficiary. 69. The effect of the section is the beneficiary, and not the trustee, is liable for any capital gain or loss that arises in relation to the asset. It also ensures the connected entity and stakeholder tests in respect of the asset are determined by reference to the beneficiary. 70. In Draft Taxation Ruling TR 2004/D25 Income tax: capital gains: meaning of the words 'absolutely entitled to a CGT asset as against the trustee of a trust' as used in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (TR 2004/D25), the Commissioner stated his view that the core principle underlying the concept of absolute entitlement in the CGT rules is the ability of a beneficiary who has a vested and indefeasible interest in the entire trust asset to call for the asset to be transferred to them or as they so direct. 71. Paragraph 10 of TR 2004/D25 provides that the core principle underpinning the concept of absolute entitlement in the CGT provisions is the ability of a beneficiary, who has a vested and indefeasible interest in the entire trust asset, to call for the asset to be transferred to them or to be transferred at their direction. 72. The core principle is derived from the rule in Sauders v Vautier applied in the context of the CGT provisions: see paragraphs 41 to 50 in TR 2004/D25. 73. Under the rule in Sauders v Vautier , the courts do not regard as effective a direction from the settlor that purports to delay the beneficiary's full enjoyment of an asset. However, if there is some basis upon which a trustee can legitimately resist the beneficiary's call for an asset, then the beneficiary will not be absolutely entitled as against the trustee. 74. Factors that do not prevent a beneficiary being absolutely entitled to an asset include: • there is a mortgage, encumbrance or other charge over the asset in favour of a third party • there is a trustee's lien to enforce a right of indemnity against a trust asset, or • the beneficiary cannot give the trustee a good discharge for any asset transferred to them because they are suffering a legal disability. 75. The most straight forward application of the core principle is one where a single beneficiary has all the interest in the trust asset. Generally, a beneficiary will not be absolutely entitled to a trust if one or more beneficiaries also have an interest in the trust asset. 76. Paragraphs 21 and 22 of TR 2004/D25 provides that a beneficiary has all the interest in a trust asset if no other beneficiary has an interest in the asset (even if the trust has other beneficiaries) and such a beneficiary will be absolutely entitled to that asset as against the trustee purposes of the CGT provisions if the beneficiary can (ignoring any legal disability) terminate the trust in respect of that asset by directing the trustee to transfer to them or to transfer it at their direction. 77. The Trust Instrument of the Foreign Trust provides during the Deceased's lifetime and while they are able to manage their affairs the trustee shall pay to them, on their signed order, all the net income and so much of the principal as they from time to time directed in writing. 78. The Trust Instrument also provides that on the death of the Deceased, the trustee shall distribute the residuary trust estate (which is all the trust estate not effectively disposed of under the proceeding provisions of the Restatement) in equal shares to 2 foreign residents. 79. Accordingly, the Deceased effectively had a life interest in the net income of the trust, had the power to call upon the trustee to transfer any trust asset to themselves or another party at their direction during their lifetime. However, on the Deceased death their interests in net income of the Trust came to an end and the residuary trust estate was to be distributed to 2 foreign residents. Whilst the 2 foreign resident beneficiaries stood to benefit on the Deceased's death, while they were alive, this could be defeated by the Deceased amending the Trust Instrument or directing the trustee of the Foreign Trust to transfer all of the principal of the trust to them, thereby bringing the Foreign Trust to an end. 80. Over the years, the Deceased did at times direct the trustee of the Foreign Trust to transfer amounts or assets to them or the 2 foreign resident beneficiaries. The Deceased also had the power to amend or revoke the terms of the Foreign Trust and could (and did) use this power to replace the corporate trustee. This indicates the Deceased being absolutely entitled to the assets of the Foreign Trust. 81. However, there are other factors that point against the Deceased being absolutely entitled to assets of the Foreign Trust. This includes the trustee's power to: (a) retain indefinitely or invest in stocks, bonds, mortgages, notes, common trust funds, shares of any investment company or trust, and any other real or personal property (b) sell, option, exchange, partition, dedicate, grant easements, licences or leases within or beyond the term of any trust, improve, repair, remodel, demolish, abandon, subdivide, develop or other contract with respect to any real or personal trust property; to contest, settle or abandon claims of or against the trust (c) divide or distribute trust property in cash, kind, both, undivided interests, different assets, or disproportionate interests in assets, and (d) transfer the situs of the trust property to any other jurisdiction and to appoint a special trustee with the same power as the trustee to invest in property outside the Foreign jurisdiction 82. In relation to the power of sale, in Oswal v FC of T [2013] FCA 745 (Oswal), Edmonds J stated: There can be no doubt that the exercise by a trustee of a power of sale , either expressed in the instrument creating the trust or conferred by statute, of an asset vested in the trustee for the absolute benefit of a beneficiary would defeat that beneficiary's interest in the asset (albeit giving rise to an equivalent interest in the proceeds of sale). In that sense, the beneficiary's interest in the asset is defeasible, as referred to by his Honour by reference to what was said by Tamberlin and Hely JJ in Kent v SS "Maria Luisa" (No 2) at [71], even though, until the power is exercised, the beneficiary's entitlement to call for a transfer of, or a dealing with, the asset exists. (Emphasis added) 83. The trustee's power of sale points to the Deceased's interest in the Foreign Trust being defeasible. The following also points to the Deceased's interest being defeasible: • no individual trustee shall be liable for any loss resulting from any act, or failure to act, in good faith, indicating the trustee is free to exercise its powers • the trustee is also entitled to reimbursement for expenses and reasonable compensation 84. Consequently, it is the Commissioner's view the Deceased is not absolutely entitled to the assets of the Foreign Trust. | Detailed Reasoning - Present entitlement to income of the US Trust: 85. A beneficiary's assessable exempt and non-assessable non-exempt income is determined under subsection 97(1) of the ITAA 1936, where the beneficiary is presently entitled to a share of the income of the trust estate. | Detailed Reasoning - Meaning of presently entitled: 86. There is no statutory definition of the term 'presently entitlement' so its meaning is derived from trust law. 87. The meaning of the term 'presently entitled' has been considered by the High Court on a number of occasions. 88. In FC of T v Hamer & Ors 90 ATC 4672 the High Court held that a beneficiary is presently entitled to a share of the income of the trust estate if, and only if: • the beneficiary has an interest in the income that is both vest in interest and vested in possession, and • the beneficiary has a present legal right to demand and receive payment of the income, whether not the precise entitlement can be ascertained before the end of the relevant year of income and whether or not the trustee has the funds available for immediate payment. 89. Determining whether a beneficiary is presently entitled is a matter of examining and interpreting the terms of the trust in accordance with the principles of trust law. 90. The following general principles on the meaning of 'presently entitled' can be extracted from Australian case law: • a beneficiary will only be presently entitled where they have an indefeasible, absolutely vested, beneficial interest in possession in the trust income and are able to demand immediate payment of the trust income. • if the beneficiary's interest is only contingent, they will not be presently entitled. • a beneficiary can only be presently entitled to income that according to trust law is legally available for distribution to the beneficiary, even though at the relevant time it may not be in the trustee's hands for distribution. • a beneficiary can only be presently entitled to income that the trustee has appointed in the beneficiary's favour prior to the year's end. 91. The Trust Instrument makes it clear that each trust created is governed by the Trust Law of the Foreign jurisdiction and the law of the domicile of the trustee having custody from time to time of the trust assets or the documents of title shall govern administration. 92. Under the Trust Instrument the Trustee of the Foreign Trust is required during their lifetime of the Deceased to pay to them or on their signed order, all the net income of the Foreign Trust. 93. Consequently, in all income years from the establishment of the Foreign Trust to the income year that precedes the one in which the Deceased died, the Deceased will be presently entitled to all of the net income derived by the Foreign Trust. 94. As the Deceased was only entitled to the net income during their life, the Deceased cannot be presently entitled to any net income derived by the Foreign Trust after their death as the Deceased has no interest in net income and assets of the Foreign Trust after their death. 95. Accordingly, the Deceased will be presently entitled to all net income earned by the Foreign Trust in all the income years before their death, including the income derived by the Foreign Trust before their death in the income year that they died. | Detailed Reasoning - Question 11: Will any capital gains or capital losses be made by the Deceased at the Date of Death in respect of Deceased's interest in the Foreign Trust? | Summary: CGT event C2 happens as the Deceased's interest in the Foreign Trust expires on their death, however, any capital loss made in relation to this CGT event happening is disregarded pursuant to section 128-10 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: 96. There are several possible CGT events that could have happen given the Deceased ceased to have an interest in the Foreign Trust from the Date of Death. The events include: (a) CGT event C2, (b) CGT event E6, (c) CGT event E7, and (d) CGT event E8. 97. CGT event E6 happens if the trustee of a trust disposes of a CGT asset of the trust to a beneficiary in satisfaction of a beneficiary's right (or part of it) to receive income from the trust. 98. CGT event E7 happens if the trustee of a trust disposes of a CGT asset of the trust to a beneficiary in satisfaction of the beneficiary's interest (or part of it) in the trust capital. 99. CGT event E8 happens if the beneficiary under a trust disposes of an interest (or part of it) in the trust capital. 100. In this case, the Deceased's interest in the US Trust expired because of the death of the Deceased. The Deceased's interest in the Foreign Trust did not come to an end because the trustee had disposed of a CGT asset of the Foreign Trust in satisfaction of the Deceased's right to receive income or capital from the Foreign Trust nor did the Deceased dispose of their interest in the Foreign Trust to another entity. 101. Consequently, none of CGT events E6, E7 and E8 happen in relation to the Deceased interest in the Foreign Trust ending. 102. However, consideration still needs to be given if CGT event C2 happens in relation to end of the Deceased interests in the Foreign Trust. | Detailed Reasoning - CGT event C2: 103. Subsection 104-25(1) of the ITAA 1997 states: CGT event C2 happens if your ownership of an intangible CGT asset ends by the asset: (a) being redeemed or cancelled; or (b) being released, discharged or satisfied; or (c) expiring; or (d) being abandoned, surrendered or forfeited; or (e) if the asset is an option - being exercised; or (f) if the asset is a convertible interest - being converted. 104. Taxation Ruling 2006/14 Income tax: capital gains tax: consequences of creating life and remainder interests in property and of later events affecting those interests (TR 2006/14) sets out the Commissioner's views regarding the consequences of creating life and remainder interest in property and of any subsequent dealing in those interests. 105. Paragraph 38 of TR 2006/14 states: The death of the person by whose life a life interest is measured will cause the life interest to end. There will be consequences for the life interest owner and there may also be consequences for the trustee and the remainder owner. 106. The assets transferred to the Foreign Trust on or after its establishment were assets that were held in another trust for the Deceased. 107. Under the terms of the Foreign Trust, the Deceased's interests in the net income and assets of the trust were effectively a life interest. 108. Paragraph 40 of TR 2006/14 states: CGT event C2 happens when the asset ends: subsection 104-25(2). In the case of an equitable life interest, CGT event C2 happens when the measuring life for the life interest dies because the interest expires at that time. 109. Paragraph 44 of TR 2006/14 states: If the life interest was measured by the life of its owner, any capital loss from CGT event C2 happening is disregarded under section 128-10. That section disregards gains and losses from CGT events that happen to assets owned by an individual as a result of their death. 110. When the Deceased died, their interest in the Foreign Trust ended for CGT purposes, it does not pass to Deceased's personal legal representative, Therefore, CGT event C2 happened as the Deceased's interest in the Foreign Trust came to an end. Any capital gain or capital loss made would ordinarily need to be included in the Deceased's final Date of Death income tax return. However, any capital gain or capital loss made from CGT event C2 happening to the Deceased's interest in the Foreign Trust are to be disregarded undersection 128-10 of the ITAA 1997, as the event happened because of their death. | Detailed Reasoning - Question 12: Was the Foreign Trust at any time: (a) a 'resident trust estate' for the purposes of Division 6 of the ITAA 1936? (b) a 'resident trust for CGT purposes' under the Tax Acts? subject to the tax residency articles in the Double Tax Agreement between Australia and a foreign jurisdiction? | Summary: The Foreign Trust was a resident trust estate or a resident trust for CGT purposes in each income year from when the Foreign Trust was established up to and including the entirety of 20XX income year, the year in which the Deceased died. | Detailed Reasoning - 'Resident trust estate: 111. Subsection 95(2) of the ITAA 1936 states that for the purposes of Division 6 in ITAA 1936, a trust estate shall be taken to be a resident trust estate in relation to an income year if: (a) a trustee of the trust estate was a resident at any time during the year of income, or (b) the central management and control of the trust estate was in Australia at any time during the year of income. 112. Subsection 6(1) of the ITAA 1936 states: "resident trust for CGT purposes" has the same meaning as in the Income Tax Assessment Act 1997 . 113. As the Foreign Trust is not a unit trust, subsection 995-1(1) of the ITAA 1997 states: "resident trust for CGT purposes" : a trust is a resident trust for CGT purposes for an income year if, at any time during the income year: (a) for a trust that is not a unit trust, a trustee is an Australian resident or the central management and control of the trust is in Australia; ... | Detailed Reasoning - Does the Double Tax Agreement effect the residency of the Foreign Trust: 114. Article 4(1) of the Convention provides definition of Residency in both Australia and the foreign jurisdiction. 115. The Foreign Trust is a resident of Australia under the DTA until the Date of Death, as the Deceased was an Australian resident for income tax purposes and was presently entitled to all income of the Foreign Trust whilst alive. 116. However, the Deceased is not presently entitled to any income derived by the Foreign Trust after the Date of Death and consequently, the Foreign Trust is not an Australian resident for income tax purposes after the Date of Death because: (a) none of the income derived by the Foreign Trust has an Australian source, and (b) all the income beneficiaries of the Foreign Trust, after the Date of Death, were not residents of Australia for income tax purposes. | Detailed Reasoning - Conclusion: 117. Both definitions of residency provides that where an Australian resident is a trustee (whether or not there is more than one trustee) of a trust estate at any time during the income year the trust will be a resident trust estate for the purposes of Division 6 of the ITAA 1936 and a resident trust for CGT purposes for that income year. 118. The Deceased was an Australian resident for income tax purposes as all times from when the Foreign Trust was established until the Date of Death and the Deceased was also a co-trustee of the Foreign Trust at times during that period. 119. Consequently, the Foreign Trust was a resident trust estate or a resident trust for CGT purposes in each income year from when the Foreign Trust was established up to and including the entirety of 20XX income year, the year in which the Deceased died. | Detailed Reasoning - Question 13: Does CGT event I2 under subsection 104-170(1) of the ITAA 1997 happen in relation to the Foreign Trust on the Date of Death? | Summary: CGT event I2 does happen at the Date of Death as the Foreign Trust ceased to be a resident trust for CGT purposes at that time. | Detailed Reasoning - Detailed reasoning: 120. Section 104-170 of the ITAA 1997 states: (1) CGT event I2 happens if a trust stops being a resident trust for CGT purposes. (2) The time of the event is when the trust stops being one. (3) The trustee needs to work out if it has made a capital gain or a capital loss for each CGT asset that it owned (in it capacity as trustee of the trust) just before the time of the event except one that is taxable Australian property: (a) covered by item 1 or 3 of the table in section 855-15; or (b) covered by item 4 of that table because it is an option or a right to acquire a CGT asset covered buy item 1 or 3 of that table. | Detailed Reasoning - Time when CGT event I2 happens: 121. Paragraph 6 in Taxation Determination TD 1999/83 Income tax: capital gains: if a trust: (a) becomes a resident trust - when is it taken to have acquired its CGT assets? (b) stops being a resident trust - when does CGT event I2 in section 104-170 of the Income Tax Assessment Act 1997 happen? states: A trust stops being a 'resident for CGT purposes' at a time during the income year when the requirements for the definition of that expression are no longer satisfied. For a trust that is not a unit trust, for example, it stops being a 'resident trust for CGT purposes' when the trustee stop being a resident for and the central management and control is not in Australia. 122. Accordingly, CGT event I2 happens to the Foreign Trust as it ceases to be a resident trust for CGT purposes. 123. On and from the Date of Death, the Deceased stopped being a co-trustee of the Foreign Trust and no trustee of the Foreign Trust from the Date of Death was a resident of Australia for income tax purposes and the central management and control was not exercised in Australia, as all trustees resided in the foreign jurisdiction or were controlled from the foreign jurisdiction. 124. Accordingly, from the Date of Death the Foreign Trust will be deemed to be a non-resident of Australia. 125. Consequently, the time the event happens when the Foreign Trust ceased to be a resident trust for CGT purposes, i.e. at the Date of Death. | Detailed Reasoning - Question 14: If there are any capital gains that arise when CGT event I2 happens, are these capital gains disregarded under section 855-40 of the ITAA 1997? | Summary: Pursuant to subsection 855-40(2) of the ITAA 1997 any capital gains made when CGT event I2 happened on the change of residence of the Foreign Trust will be disregarded. | Detailed Reasoning - Detailed reasoning: 126. Subsection 855-40(2) of the ITAA 1997 states: A capital gain you make in respect of your interest in a fixed trust is disregarded if: (a) you are a foreign resident when you make the gain; and (b) the gain is attributable to a CGT event happening to a CGT asset of the trust (the CGT event Trust) that is: i. the fixed trust; ii. another fixed trust in which the trust has an interest directly or indirectly through a chain or trusts, each trust in which is a fixed trust); and (c) either i. the asset is not taxable Australian property for CGT event Trust; or ii. the asset is an interest in a fixed trust and the conditions in (5), (6), (7), (8) and (9) are satisfied. 127. The term 'fixed trust' is defined in subsection 995-1(1) of the ITAA 1997 as: A trust is a fixed trust if entities have fixed entitlements to all of the income and capital of the trust. 128. The term 'fixed entitlement; is defined in subsection 995-1(1) of the ITAA 1997 as: An entity has a fixed entitlement to a share of income or capital of a company, partnership or trust if the entity has a fixed entitlement within the meaning of Division 272 of Schedule 2F of the Income Tax Assessment Act 1936 129. Subsection 272-5(1) of Schedule 2F to the ITAA 1936 states: If, under a trust instrument, a beneficiary has a vested and indefeasible interest in the share of income of the trust derived from time to time, or of the capital of the trust, the beneficiary has a fixed entitlement to that share of the income or capital 130. The Foreign Trust is governed by a written trust instrument. The 2 foreign beneficiaries of the Foreign Trust have a vested interest pursuant the Foreign Trust's written trust instrument, as at the Date of Death they have interests in the income and capital of the Foreign Trust which is vested in possession. 131. In addition, their interests in the income and capital of the Foreign Trust cannot be defeated by the actions of one or more persons or the occurrence of one or more subsequent events. 132. Accordingly, the 2 foreign beneficiaries share in the income and capital of the Foreign Trust accounts for all the interests in the income and capital of the Foreign Trust. 133. Therefore, the Foreign Trust is a fixed trust just after the Date of Death. 134. Accordingly, pursuant to subsection 855-40(2) of the ITAA 1997 any capital gains made when CGT event I2 happened on the change of residence of the Foreign Trust will be disregarded as the: (a) Foreign Trust is a fixed trust (b) CGT assets of the Foreign Trust are not 'taxable Australian property' as they consist of corporate bonds and shares in foreign domiciled companies, and (c) beneficiaries of the Foreign Trust are foreign residents. | Detailed Reasoning - Question 15: Is the Executor's personal liability under section 254 of the ITAA 1936 only in respect of income tax assessed to the Estate for the 20XX and 20XX income years in respect of the assessable income derived by the Executor in these income years, which is expected to be: (a) dividend income (b) interest income, and (c) net capital gains from the sale of Australian Shares and the Coins? | Summary: Section 254 of the ITAA 1936 makes the Executor liable to pay tax on the income, profits or gains derived by the Executor in their capacity as the trustee of the deceased estate. Therefore, the Executor has the right to retain sufficient amounts from the income, profits and gains derived by the deceased estate to pay the tax assessed, or that will be assessed to the deceased estate in the future. | Detailed Reasoning - Detailed reasoning: 135. Section 254 of ITAA 1936 imposes a number of general obligations upon agents and trustees in respect of any income, profits or gains of a capital nature derived by the agent or trustee in their representative capacity, or derived by the principal by virtue of their agency. Broadly in respect of any such income, profits or gains, the agent or trustee: • is responsible for the taxation consequences that flow from the derivation of those amounts • is required to lodge returns, and • is assessed in their representative capacity. 136. ATO Interpretative Decision ATO ID 2003/506 Income tax: Taxation obligations of company administrators , clarifies the duties and obligations created by section 254 of ITAA 1936 by stating: Therefore, section 254 of the ITAA 1936 does not create a personal responsibility in the administrator for tax assessed to the company. However, it makes the administrator liable to pay tax on income, profits or gains of a capital nature derived by the administrator in their capacity as trustee (for tax purposes) of the company. 137. Section 254 of ITAA 1936 does not define the terms 'Agents' or 'Trustees'. 138. Subsection 6(1) of the ITAA 1936 defines 'trustee' as: trustee in addition to every person appointed or constituted trustee by act of parties, by order, or declaration of a court, or by operation of law, includes: (a) an executor or administrator, guardian, committee, receiver, or liquidator; and (b) every person having or taking upon himself the administration or control of income affected by any express or implied trust, or acting in any fiduciary capacity, or having the possession, control or management of the income of a person under any legal or other disability. 139. The Executor of a deceased estate falls within the definition of 'trustee' in subsection 6(1) of the ITAA 1936. Accordingly, the provisions of section 254 of ITAA 1936 apply to the Executor. 140. As a consequence, the Executor is required to retain sufficient amounts from income derived in their capacity as Executor of the deceased estate under paragraph 254(1)(d) of the ITAA 1936. This retention requirement is a statutory requirement and takes precedence over other claims on the money. 141. The Executor is personally liable for the tax payable in respect of the income, profits or gains derived by the deceased estate to the extent of any amount that was retained or should have been retained under paragraph 254(1)(d) of the ITAA 1936 but is not otherwise personally liable for the tax. 142. The liability under paragraph 254(1)(e) of the ITAA 1936 only crystallises when an assessment has issued in respect of the relevant income, profits or gains. [1] Subsection 108-5(1) of the ITAA 1997 [2] Subsection 104-10(3) of the ITAA 1997 [3] Subsection 108-5(1) of the ITAA 1997 [4] Subsection 104-10(2) of the ITAA 1997 [5] Subsection 104-10(3) of the ITAA 1997 [6] Subparagraph 115-100(a)(ii) of the ITAA 1997 [7] Refer method statement in subsection 102-5(1) of the ITAA 1997 [8] Subsection 108-5(1) of the ITAA 1997 [9] Subsection 104-10(2) of the ITAA 1997 [10] Subsection 102-5(1) of the ITAA 1997 [11] Subsection 104-215(5) of the ITAA 1997 [12] Subsection 118-10(1) of the ITAA 1997 [13] Subsection 118-10(3) of the ITAA 1997 [14] Subsection 108-20(1) of the ITAA 1997 [15] Paragraph 108-10(2)(a) of the ITAA 1997 [16] Refer to the method statement in subsection 102-5(1) of the ITAA 1997

Will the Commissioner exercise his discretion under subsection 99A(2) of the ITAA 1936 to tax the Executor on the income that no beneficiary of the deceased estate is presently entitled to under section 99 of the ITAA 1936 for the 20XX, 20XX and 20XX income years?