Private ruling: Commissioners discretion
Date of advice: 29 May 2026
Published: 17 August 2026
Ruling period: Year ending DD MM YYYY | Year ending DD MM YYYY | Year ending DD MM YYYY | Year ending DD MM YYYY | Year ending DD MM YYYY | Year ending DD MM YYYY | Year ending DD MM YYYY | Year ending DD MM YYYY
Date scheme commenced: DD MM YYYY

Ruling: Q1: To the extent that the Trustee of the Trust is assessable and liable to pay tax on the net income of the Trust will the Commissioner exercise the discretion, in subsection 99A(2) of the Income Tax Assessment Act (ITAA 1936), to assess the Trustee at the tax rate declared by the Parliament applicable to section 99 (rather than the tax rate applicable to section 99A) for the income years ended DD MM YYYY to DD MM YYYY? | A1: Yes. | Q2: In circumstances where the Trustee makes a 'discount capital gain' (as defined in section 115-5 of the Income Tax Assessment Act 1997 ( ITAA 1997)) will subsection 222(2) apply for each capital gain of the Trust during the years ended DD MM YYYY and DD MM YYYY, such that the Trustee will be entitled to a 'discount percentage' of 50% (under subparagraph 115-100(a)(ii))? | A2: Yes. | Q3: For the years ended DD MM YYYY and DD MM YYYY, will subsection 12(6) of the Income Tax Rates Act 1986 (ITRA 1986) apply to determine the rate of tax at which the Trustee of the Trust will be assessed and liable to pay tax (on the net income of the Trust)? | A3: Yes. | Q4: For the years ended DD MM YYYY to DD MM YYYY, will subsection 12(6) of the ITRA 1986 apply to determine the rate of tax at which the Trustee of the Trust will be assessed and liable to pay tax (on the net income of the Trust)? | A4: Yes.

Relevant facts and circumstances: This description of facts is based on the following documents. The documents form part of and are to be read with this description. The relevant documents are: • Your Private Binding Ruling ('PBR') Application dated DD MM YYYY; • The email from the ATO on DD MM YYYY; • The email to the ATO from XX dated DD MM YYYY; • The email from the ATO on DD MM YYYY; and • The email to the ATO from XX dated DD MM YYYY. 1. The Late XX (the Deceased) died on DD MM YYYY. 2. The Will of the Deceased (the Will) was dated DD MM YYYY (Copy provided). 3. The Deceased's child XX and XX (an unrelated business advisor) were appointed to be executors and trustees in accordance with Clause XX of the Will. 4. Clause XX of the Will provides that: Provided I am survived by any of my Children or grandchildren and subject to clause XX, I give the rest of my estate on trust to my Trustee to divide into two parts, and distribute as follows: (a) One part to the trustee nominated in the Schedule to be held on trust on the terms in the schedule as though XX was named as the primary beneficiary in clause XX of the Schedule (XX Testamentary Trust). (b) One part to the trustee nominated in the Schedule to be held on trust on the terms in the schedule as though my son XX was named as the primary beneficiary in clause XX of the Schedule (XX Testamentary Trust). 5. Clause XX of the Will provides that: The proportion of the rest of my estate that will be included in each part under clause XX will be determined by my Trustee so that (as nearly as possible) the total value of: (a) the property held on each trust; plus (b) the property given to the primary beneficiary of that trust under clause XX; plus (c) the amount of any Superannuation Benefit paid directly to the primary beneficiary of that trust or their children from a complying superannuation fund or allocated to an accumulation or pension account in a complying superannuation fund for the benefit of the relevant person as a consequence of my death, is equal. 6. Clause XX of the Will provides that: Each of my Children may request my Trustee that: (a) the share of my estate being left to a testamentary trust of which that Child is the primary beneficiary under clause XX of this Will; or (b) any specific assets that comprise part of the share of my estate being left to a testamentary trust of which that Child is the primary beneficiary under clause XX of this Will, be instead a gift to that child directly. A request under this clause must be made within twelve months of the date of my death, and can only be made by that Child, and not, for example, by an attorney or representative of a Child. On receipt of a request from one of my children my Trustee must consider the request in light of the circumstances of the individual child, the funds in my estate and the advice of my legal and accounting advisers and, if it is appropriate, grant the request. lf any request is granted by my Trustee then that child's share or the specific asset included in that share will be distributed as though that one-half share or that specific asset was a direct gift to the child named as the primary beneficiary in the particular sub-clause of clause XX. 7. We requested further information in our email DD MM YYYY. In our email we also asked you to, among other things confirm that: • The assets held by the Trustee consist of: - assets vested in them that were assets of the XX; - cash earned from holding those assets; and • The assets held by the Trustee do not consist of: - investments in any private companies or private trusts; - other assets acquired at non-arm's length value; or - loans related to related parties. • You agreed to the inclusion of certain Assumptions to apply throughout the Ruling Period.

Relevant legislative provisions: 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 paragraph 99A(2)(a) | Income Tax Assessment Act 1936 subparagraph 99A(2)(a)(i) | Income Tax Assessment Act 1936 subsection 99A(3) | Income Tax Assessment Act 1936 paragraph 99A(3)(a) | Income Tax Assessment Act 1936 paragraph 99A(3)(b) | Income Tax Assessment Act 1936 paragraph 99A(3)(c) | Income Tax Assessment Act 1936 subsection 99A(3A) | Income Tax Assessment Act 1936 paragraph 102AG(2)(c) | Income Tax Assessment Act 1997 section 104-10 | 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 section 115-100 | Income Tax Assessment Act 1997 section 115-220 | Income Tax Assessment Act 1997 section 115-222 | Income Tax Rates Act 1986 section 12(6) | Income Tax Rates Act 1986 section 14(1)

Reasons for decision: Summary: After consideration of the relevant factors, 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 in relation to the income years ended DD MM YYYY to DD MM YYYY. Therefore, the Commissioner will exercise the discretion, under subsection 99A(2) of the ITAA 1936 to allow section 99 to apply where the Trustee of the Trust is liable to pay tax on income to which no beneficiary is presently entitled during the income years ended DD MM YYYY to DD MM YYYY. | Detailed Reasoning - The relevant legislation: Under subsection 99A(2) of the ITAA 1936, section 99A will not apply to the net income of a resident trust estate retained by certain trust estates where the '... Commissioner is of the opinion that it would be unreasonable that this section should apply in relation to that trust estate in relation to that year of income...'. Instead section 99 of the ITAA 1936 will apply to that net income such that the net income of the trust will be taxed at the progressive rates applicable to certain individuals rather than at the flat top marginal tax rate (although, the availability of the tax-free threshold is only available to trustees of trusts where the relevant person died less than 3 years before the end of the relevant year of income). In exercising the discretion, the Commissioner will have reference to the text of the legislation itself, the intent or purpose of the legislation and relevant case law as they apply to the facts and circumstances of a particular case for the purpose of forming the required opinion under subsection 99A(2) of the ITAA 1936. The types of trust estate in respect of which the Commissioner's discretion may be exercised are listed in paragraphs 99A(2)(a) to (d) of the ITAA 1936 and include a trust estate that resulted from a will (paragraph 99A(2)(a)). In forming the opinion for the purposes of subsection 99A(2) of the ITAA 1936 the Commissioner is required to have regard to the matter subsections 99A(3) and (3A). These provide: 99A(3) 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. 99A(3A) For the purposes of the application of paragraph (3)(a) in relation to a trust estate of the kind referred to in paragraph (2)(a), a reference in that first-mentioned paragraph to the trust estate shall be read as including a reference to the person as a result of whose death the trust estate arose. | Detailed Reasoning - Application of the legislation to the facts: The Trust was created under the terms of the Will of the Late XX (dated DD MM YYYY) and is considered to be a 'trust estate ... that resulted from a will' for the purposes of subparagraph 99A(2)(a)(i) of the ITAA 1936. The Trustee has had retained net income during the income year ended DD MM YYYY. The Trustee may retain net income in respect of an income year included in the Ruling Period. This net income will fall to be assessed to the Trustee under section 99A of the ITAA 1936 unless, '... the Commissioner is of the opinion that it would be unreasonable that this section should apply in relation to that trust estate in relation to that year of income.' (subsection 99A(2)) In forming the opinion for the purposes of subsection 99A(2) of the ITAA 1936 the Commissioner is required to have regard to the matters in subsection 99A(3) and 99A(3A). | Detailed Reasoning - Consideration of paragraphs 99A(3)(a) and (b) of the ITAA 1936: You have advised that the total assets of the Trust during the income year ended DD MM YYYY ($xxx) consisted of bank accounts, distributions receivable and shares in both listed and unlisted companies, plus units in managed funds. | Detailed Reasoning - Consideration of paragraph 99A(3)(c) of the ITAA 1936: In the current circumstances the 'other matters' that are considered to be relevant for the purposes of forming an opinion for the purposes of subsection 99A(2) of the ITAA 1936 are encapsulated by the matters enunciated by Member Thompson in Case A50 ((1969) 69 ATC 288). Broadly, these matters involve the Commissioner having regard to the objects of the section in protecting, on the one hand, the revenue against tax avoiding devices and the interests of taxpayers generally in the equal distribution of the tax burden and, on the other hand, the right of the subject to make legitimate and reasonable family and business arrangements. Each of these matters will be considered in turn: 1. The Revenue should be protected against tax avoiding devices: In considering whether to exercise his discretion under subsection 99A(2) of the ITAA 1936, the Commissioner must have regard to preventing the use of trusts for tax avoidance, in particular by allowing the lower tax rate under section 99 to apply to trusts that have a tax avoidance purpose. In this case, the Trustee has not used, and will not use, his powers under the Trust to avoid tax. 2. The interests of taxpayers generally should be protected: In considering the exercise of the discretion in subsection 99A(2) of the ITAA 1936 the Commissioner will consider whether the type of arrangement under consideration may cause the tax burden to fall unevenly on taxpayers. The discretion is to be exercised in way that will discourage arrangements that would otherwise result in tax avoidance. In this case, the Trustee has exercised, and will exercise, his powers under the Trust in a conventional manner (and not as a tax avoidance device). 3. The right of the subject to make legitimate and reasonable arrangements relating to family and business matters should be protected: The Trust's assets consist of assets owned by the Deceased when they died. The Trust is being, and will be, administered by the Trustee in a conventional manner. 4. Arrangements which are for the good of the public generally should not be discouraged: The Trust is not a trust of the type that is relevant to this matter. 5. Trusts which arise out of the exercise of a public duty should not be penalised: The Trust is not a trust of the type that is relevant to this matter. | Detailed Reasoning - Surrounding circumstances to also be considered: In Case A50 Thompson suggested that [at 302 and 303], in the process of forming an opinion for the purposes of subsection 99A(2) of the ITAA 1936 the Commissioner should undertake, '[a] wide survey and close scrutiny of all the surrounding circumstances , including, but not by any means limited to' [emphasis added]: • an examination of the terms of any relevant instrument; • the manner in which those terms have been or are capable of being implemented; • the circumstances under which the trust is called into being; • the overall effect achieved or sought to be achieved upon the tax affairs of all parties directly or indirectly affected by the trust; and • and the manner in which the arrangement is administered. In relation to these 'surrounding circumstances' it is noted that: • the Trust is a testamentary trust that resulted from the Will of the Late XX dated DD MM YYYY. Conclusion as to whether it is unreasonable for section 99A of the ITAA 1936 to apply to the Trust in respect of the income years ended DD MM YYYY to DD MM YYYY inclusive The matters that are considered to be particularly relevant to forming the opinion for the purposes of subsection 99A(2) of the ITAA 1936 are: • The Trust resulted from a will and satisfies the requirement of paragraph 99A(2)(a). • In the income years ending DD MM YYYY to DD MM YYYY: - The Trust Deed will not be amended. - The Trustee will retain an amount of trust income. - Tax has not been, and will not be, avoided by the exercise of the powers available to the Trustee under the Will. - The Trust has been, and will be, administered in a conventional manner by the Trustee and not as a tax avoidance device. - The Trustee has not, and will not enter into arrangements beyond the purpose for which section 99 was retained in the ITAA 1936 of a type that the Commissioner will seek to discourage. • The property of the Trust will only consist of: - property vested in the Trustee (that was vested in the Executor of the Estate of the Late XX) under the terms of the Last Will and Testament of the deceased individual; - property that represents accumulations of income or capital from property that satisfies the requirement in (i); - property from the sale of these assets of the Trust; - property from the re-investment of property that satisfies the requirement in (iii); and • The assets held by the Trustee will not consist of: - investments in any private companies or private trusts where there are discretionary rights to income or capital; - other assets acquired at non-arm's length value; or - loans provided to related parties. • The distributions of income to the beneficiaries of the Trust will be paid out, or applied, to the relevant beneficiary within 2 years of the end of the relevant income year. • The Trustee will not avoid tax by exercising the powers available to them under the terms of the Trust Deed. Having regard to the above matters, and the legislated purpose of section 99A of the ITAA 1936 to prevent the use of trusts for tax avoidance, the Commissioner is of the opinion that it is unreasonable for section 99A to apply to the Trust in respect of the income years ending DD MM YYYY to DD MM YYYY. | Summary: Yes, where the Trustee makes a 'discount capital gain' (as defined in section 115-5 of the Income Tax Assessment Act 1997 ( ITAA 1997)) subsection 222(2) will apply for each capital gain of the Trust during the years ended DD MM YYYY and DD MM YYYY, such that the Trustee will be entitled to a 'discount percentage' of 50% (under subparagraph 115-100(a)(ii)) | Detailed Reasoning - Detailed reasoning: Division 115 of the ITAA 1997 sets out the conditions in which an entity may be entitled to a discount capital gain. To be a discount capital gain, the capital gain must meet the requirements of sections 115-10, 115-15, 115-20 and 115-25 of the ITAA 1997. The requirement under section 115-10 ITAA 1997 is met as the capital gain was made by the Trust, a trust. The requirement under section 115-15 ITAA 1997 is met as the capital gain resulted from a CGT event which happened in YYYY, and may happen in YYYY, and therefore after 21 September 1999. The requirement under section 115-20 ITAA 1997 is met as the capital gain will be worked out using a cost base calculated without reference to indexation. The requirement under section 115-25 ITAA 1997 is that the capital gain resulted from a CGT event happening to a CGT asset that was acquired by the entity making the capital gain at least 12 months before the CGT event. For the purposes of this requirement, the trustee of the Trust is deemed to have acquired the CGT assets that were sold (which are post-CGT assets), at the time XX acquired the CGT assets, in accordance with table item 3 in subsection 115-30(1) ITAA 1997. The capital gain, and anticipated capital gain, therefore resulted, or will result, from a CGT event happening to CGT assets that were acquired by the Trust more than 12 months before the event, thereby satisfying the requirement under section 115-25 ITAA 1997. As all of the relevant requirements have been met, the capital gain made by the Trust from the sale, or anticipated sale, of the assets is a discount capital gain. Pursuant to subparagraph 115-100(a)(ii) ITAA 1997, the discount percentage applied to the capital gain made by the Trust on the disposal of the assets is 50%. As section 99A of the ITAA 1936 does not apply in relation to the Trust in relation to the YYYY or YYYY income years, the discount will not be removed by the application of section 115-222 ITAA 1997. | Summary: Yes, for the years ended DD MM YYYY and DD MM YYYY, subsection 12(6) of the Income Tax Rates Act 1986 (ITRA 1986) will apply to determine the rate of tax at which the Trustee of the Trust will be assessed and liable to pay tax (on the net income of the Trust). | Detailed Reasoning - Detailed reasoning: Subsection 12(6) of the Income Tax Rates Act 1986 (ITRA 1986) states: ' Subject to sections 13, 14 and 15, the rates of tax payable by a trustee under section 98 or 99 of the Assessment Act are as set out in Schedule 10' . Sections 13 and 15 relate to a trustee assessed under section 98 of the ITAA 1936 whilst section 14 relates to a trustee assessed under section 99 of the ITAA 1936. Schedule 10 of the ITRA 1986 refers to the rates of tax payable by a trustee under section 98 or 99 of the ITAA 1936. Part 1 of Schedule 10 of the ITRA 1986 relates to resident beneficiaries and resident trust estates. Section 1 of Part 1 of Schedule 10 of the ITRA 1986 refers to a trustee who is liable to be assessed and to pay tax under section 99 of the ITAA 1936 in respect of the net income or part of the net income of a resident trust estate, being the net income or part of the net income of the estate of a deceased person who died less than 3 years before the end of the year of income. [1] Therefore, it is not applicable to the current circumstances (as the Trust is a testamentary trust). Section 2 of Part 1 of Schedule 10 of the ITRA 1986 refers to a trustee who is liable to be assessed and to pay tax under section 99 of the ITAA 1936 in respect of the net income or part of the net income of a resident trust estate, other than income to which clause 1 applies, the rate of tax is the rate that would be payable under Part I of Schedule 7 in respect of a taxable income equal to that net income or that part of the net income if - (a) one individual were liable to be assessed and to pay tax on that income; and (b) the words " exceeds the tax-free threshold but " were omitted from item 1 of the table applicable to the year of income in Part I of Schedule 7. Section 14 of the ITRA 1986 then modifies the rates in Part I of Schedule 7 (it, reduces the tax-free threshold to $416 [2] and prescribes a 'net income phase-out limit' [3] ). | Summary: For the years ended DD MM YYYY to DD MM YYYY, subsection 12(6) of the ITRA 1986 will apply to determine the rate of tax at which the Trustee of the Trust will be assessed and liable to pay tax (on the net income of the Trust). | Detailed Reasoning - Detailed reasoning: Refer to the Detailed reasoning for Question 3. [1] Income Tax Rates Act 1986 clause 1(b) of Section 1 of Part 1 of Schedule 10 [2] Income Tax Rates Act 1986 subsection 14(1) [3] Income Tax Rates Act 1986 subsections 14(2) and (3)