Private ruling: Trustee - testamentary trust
Date of advice: 26 February 2026
Published: 11 May 2026
Ruling period: period ending 30 June 20XX | period ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: In respect of the income of an estate and trust (the Trust) that is applied for the beneficiary's benefit, will the Executor be assessed under section 98 of the ITAA 1936? The beneficiary is a minor under a legal disability. | A1: Yes. Under subsection 98(1) of the ITAA 1936, where a beneficiary is under a legal disability (such as being a minor) and is presently entitled to a share of the income of a trust estate, the trustee is assessed and liable to pay tax on that share of the Trust's net income. | Q2: In respect of the income of the Trust that is applied for the beneficiary's benefit, will the Executor be assessed under section 98 of the ITAA 1936 at the rates prescribed in section 1 of part 1 of schedule 10 of the Income Tax Rates Act 1986 (ITRA 1986)? | A2: Yes. Section 98 of the ITAA 1936 applies and the trustee will be assessed on the minor beneficiary's share of the Trust income. The tax rates prescribed in section 1 of part I of Schedule 10 of the ITRA 1986 will apply. | Q3: In respect of the income from the Trust that is not distributed to any beneficiary and is instead accumulated, will the Executor, as trustee of the Trust, be assessed under section 98 of the ITAA 1936? | A3: No. Section 98 applies only when a beneficiary is presently entitled to income and is under a legal disability, for example a minor, bankrupt, or mentally incapacitated or, when a beneficiary is a non-resident and presently entitled to income. In these cases, the trustee is assessed on the beneficiary's share of net income as if it were the income of an individual.

Relevant facts and circumstances: The Deceased passed away on XX XXX20XX. The Deceased left a will dated XX XXX 20XX (the 'Will'). The Executor applied for and was granted probate over the Estate on XX XXX 202X. In accordance with the Will, the Executor has been responsible for calling in all the assets of the Deceased and satisfying all testamentary expenses of the Deceased. This initial administration of the Estate will be wound up, with the testamentary costs of the initial stage and the ongoing administration practicalities and tax considerations being finalised. Pursuant to the Will, the Executor determined that the remainder of the assets of the Estate were to be held in a testamentary trust for the eventual distribution to beneficiaries, assets which are not required to satisfy the initial testamentary expenses and taxation of the Estate. The Executor has obtained a tax file number for the Estate. The Estate administration will be completed upon the Executor completing the duty to call in all assets of the Deceased and pay off all of the Testamentary expenses. At this stage of administration, it is contemplated there will continue to be expenses relating to the estate that prevents final determination of the assets that are to be held on the Trust. Pursuant to the Will, the Executor determined that the remainder of the assets of the Estate were to be held in a testamentary trust for eventual distribution to the beneficiary. The Will directs that the income produced accumulates to the gift, so there is no annual or regular distribution of income, however, the Executor is given authority for particular discretionary distributions under the Will. The beneficiary is currently a minor. The Estate and Trust property (the Trust Estate) consists only of property vested in the Executor as the result of the Will and represents capital and accumulated income from the estate property or the sale of that property. No other property is transferred to the Trust Estate outside that conferred by the Will and accordingly, there are no outside conferred benefits or conferred special privileges. There are no shares, and no loans have been made. The trustee is not a discretionary object in relation to another trust. There are no unpaid present entitlements of the Estate or the Trust. You have enclosed a Statement of Assets for the Estate and the Trust.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 98 | Income Tax Assessment Act 1936 subsection 98(1) | Income Tax Assessment Act 1936 section 99 | Income Tax Assessment Act 1936 subsection 99A(2) | Income Tax Rates Act 1986 Schedule 10