Private ruling: Commissioner’s Discretion under section 99A of the Income Tax Assessment Act 1936
Date of advice: 17 May 2018
Published: July 2018
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his discretion not to apply the provisions of section 99A of the Income Tax Assessment Act 1936 (ITAA 1936) and assess the trust estate under section 99 of the ITAA 1936? | A1: Yes

Relevant facts and circumstances: The testator died in 20XX. The estate has now been administered and the remaining assets of the estate are now held on behalf of their relatives. The capital of the estate is to be held until the relatives each reach age 25. Currently all relatives are all under age 18 and Australian residents. The will allows the executors discretion as to the distribution of income. Income can be wholly paid or partially paid to a beneficiary or can be wholly retained or partially retained in the Trust. The only asset of the trust is cash which has been invested into managed funds and cash. The trust holds no shares in private companies. There are no loans made to or by the trust. No person has directly or indirectly transferred money or property to the trust, conferred benefits on the trust, or conferred special privileges in the property of the trust.

Relevant legislative provisions: Section 99 of the Income Tax Assessment Act 1936; | Section 99A of the Income Tax Assessment Act 1936; | Subsection 99A(2) of the Income Tax Assessment Act 1936.

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 in relation to the relevant year of income. Accordingly section 99 of the ITAA will apply.