Private ruling: Commissioner's discretion
Date of advice: 8 July 2015
Published: July 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Will the Commissioner exercise his discretion to assess the Trustee on the income of the estate under section 99 of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes

Relevant facts and circumstances: The deceased passed away during 20XX financial year. Probate was also granted during this financial year. Two of the beneficiaries commenced a Family Provision Claim over their interest in the deceased's residence. The judgment was handed down in the relevant financial year. The affairs of the estate however were not finalised until the end of the subsequent financial year. This is more than three years after the deceased's date of death.

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

Reasons for decision: Summary: Generally, if no beneficiary of a trust estate is presently entitled to the net income of the estate, the trustee is assessed under section 99A of the ITAA 1936. However under subsection 99A(2) of the ITAA 1936, the Commissioner may exercise his discretion if he is of the opinion that it would be unreasonable for section 99A to apply. If this is the case, the trustee will be assessed under section 99 of the ITAA 1936. Section 99A of the ITAA 1936 does not apply in the following circumstances: • the trust resulted from a will; • the trust is a bankrupt estate; or • the trust is a trust that consists of property referred to in paragraph 102AG(2)(c) of the ITAA 1936; and the Commissioner forms the opinion that it would be unreasonable to apply section 99A of the ITAA 1936 in such circumstances. Subsection 99A(3) of the ITAA 1936 outlines the matters the Commissioner will consider before applying this discretion. The relevant matters include the circumstances in which property was acquired by the trust estate and such other matters as the Commissioner thinks fit. In your case, the deceased passed away during the 20XX financial year. A Family Provision Claim was launched by two of the beneficiaries. The judgment was handed during the relevant financial year, however the affairs of the estate will not be completed within three years of the deceased's death. In considering the facts of this case, the Commissioner is of the opinion that it would be unreasonable that section 99A of the ITAA 1936 should apply in relation to the trust estate. The Commissioner will exercise his discretion that section 99A of the ITAA 1936 does not apply.