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1 Is the deceased's Trust for Person A, a 'fixed trust' for the purposes of section 272-65 of Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) and subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes, the residuary beneficiaries have a vested interest in the income and capital of the estate. They each have a present right to future enjoyment of their equal share of the income and capital. The interest of the residuary beneficiaries in the income and capital of the estate is indefeasible. There is no condition in the trust instrument, the Will, by which any of the residuary beneficiaries could lose their interest in the estate. Nor is there any condition allowing the trustee to vary the proportional distribution to any of the beneficiaries of the trust. The Commissioner is satisfied that in your case, the residuary beneficiaries do have fixed entitlements to the income and capital of the estate. Therefore, based on the information provided to the Commissioner, the trust is a fixed trust upon vesting. Question 2 Are the non-resident remainder beneficiaries presently entitled to capital gains after the death of Person A, who had a life interest in the trust? Answer

Yes, upon vesting, the assets of the Trust became absolute entitlements of the beneficiaries as against the trustee, which caused capital gains tax (CGT) Event E5 in section 104-75 of the ITAA 1997 to happen in relation to the Trust's assets. The capital gains on those assets are included in the net income of the Trust. Thus, the foreign beneficiaries are presently entitled to capital gains of the trustee of the Trust as a result of the Trust vesting. In your circumstances, the non-resident beneficiaries became presently entitled to the capital gains after the death of Person A. Question 3 Can the trustee disregard capital gains incurred by non-resident beneficiaries on CGT assets which are not taxable Australian property under subsection 855-40(3) of the ITAA 1997? Answer Yes. Subsection 855-40(3) of the ITAA 1997 provides that you are not liable to pay tax as a trustee of a fixed trust in respect of an amount to the extent that the amount gives rise to a capital gain that is disregarded for a beneficiary under subsection 855-40(2) of the ITAA 1997.

Therefore, you are not liable to pay tax on capital gains which the non-resident beneficiaries can disregard under subsection 855-40(2) of the ITAA 1997. This ruling applies for the following periods : Year ended 30 June 20YY The scheme commenced on: DDMM20YY

On DDMM20YY, the deceased executed their final Will and testament. Under the deceased Will, they appointed their spouse and Company A to be executors and trustees of their Will. Pursuant to the terms of the Will of the deceased, it was directed that the trustees should hold the share of the residuary estate to which the deceased's children were entitled upon trusts namely: •  As to the net income of each child's share for such child during their lifetime. •  Upon the death of each child then such child's share to such of their children as they should by Deed or Will appoint and failing appointment then amongst all of such children of the said child equally. On DDMM19YY, the deceased passed away. The deceased was survived by 2 children namely Person A and Person B. On DDMM19YY, Probate of the deceased Will was granted to their spouse and Company A. To give effect to the terms of the Will the trustees for the time being the testator's estate established for each of the testator's children separate testamentary trusts for them. On DDMM19YY, the deceased's spouse passed.

On DDMM19YY, by deed of appointment Person A and Person B were appointed additional trustees of the deceased's estate. On DDMM20YY, by deed of retirement and appointment of new trustee, Person A retired as trustee of the estate. Income was distributed to Person A as per the Will entitlement over their lifetime. On DDMM20YY, Person A executed their final Will and testament. Clause X of Person A Will stated: IN exercise of the Power of Appointment vested in me in Clause X(X) of the last Will of the deceased dated DD day of MM19YY. I HEREBY DIRECT AND APPOINT that the Trustees of the Will of the deceased shall from and after my death stand possessed of my share in the residuary estate of the deceased both as to capital as well as income UPON TRUST to divide the same into FOUR (4) equal shares [for Person A's four children, with each share to be divided equally amongst that child's own children if any of Person A's children should predecease them] and to hold such equal shares... Child A did not survive Person A. Their share was to be distributed to their children Grandchild A and Grandchild B in equal proportions.

On DDMM20YY, Person A passed away and the trust vested in the remainder beneficiaries. The remainder beneficiaries and their distribution were as follows: •  25% to Child B; •  25% to Child C; •  25% to Child D; •  12.5% to Grandchild A; •  12.5% to Grandchild B. The assets remaining in the trust are ASX listed shares and unlisted managed funds. The remainder beneficiaries are all foreign residents of Australia.

Income Tax Assessment Act 1936 section 272-65 of Schedule 2F Income Tax Assessment Act 1997 section 128-20 Income Tax Assessment Act 1997 section 104-75 Income Tax Assessment Act 1997 section 855-10 Income Tax Assessment Act 1997 section 855-40 Income Tax Assessment Act 1997 subsection 995-1(1)