Private ruling: Trustee beneficiary - present entitlement
Date of advice: 10 February 2023
Published: 27 March 2023
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are the beneficiaries presently entitled to an interim distribution? | A1: Yes.Based on the information provided to the Commissioner the beneficiaries are presently entitled to the interim distribution. The beneficiaries will be presently entitled to the income to the extent of the amounts actually paid to them or actually paid on their behalf. | Q2: Can the trustee elect to pay the tax instead of the beneficiaries? | A2: No. Interim payments are treated as amounts to which the beneficiaries are presently entitled. The executors, as trustee under the definition in section 6(1), of the Income Tax Assessment Act 1936 (ITAA 1936) pay tax on the net income to which no beneficiary is presently entitled, unless a presently entitled beneficiary is a foreign resident or under a legal disability. In this case the beneficiaries are considered to be presently entitled. There is no discretion for the executor to elect to be liable to the taxation on amounts distributed to the beneficiaries. The amounts are included in the beneficiaries' assessable income under section 97 of the ITAA 1936.

Relevant facts and circumstances: The deceased passed away a couple of years ago. There are several adult beneficiaries. There was an interim distribution of the estate paid to beneficiaries and was made up of funds received from the disposal of various listed investments via shares and managed funds. There was a further interim distribution of the estate paid to beneficiaries and was made up of residual funds from the disposal of various listed investments plus a life policy. The trustee has retained funds in the estate to cover potential tax obligations.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 6(1)