Issue
Is the trustee of a revocable trust liable to taxation under subsection 102(2) of the Income Tax Assessment Act 1936 (ITAA 1936) where the trustee has power to revoke the trust and obtain a beneficial interest in the income or property of the trust estate?
Decision
Yes, the trustee is liable for taxation under subsection 102(2) of the ITAA 1936 as a result of the application of paragraph 102(1)(a) of the ITAA 1936.
Facts
A trust has been settled and stamped. The trustee is a Company. The settlor is a director of the company. The beneficiaries of the trust are the settlor and another individual.
The deed allows the settlor to be the beneficiary, to receive income or corpus of the trust and to be a trustee. The deed also allows the settlor to have an interest in the trust. The trust deed gives the settlor the power to alter the trust so as to acquire a beneficial interest in the income and property of the trust during the year of income.
Reasons for Decision
Paragraph 102(1)(a) of the ITAA 1936 states the Commissioner may assess the trustee under subsection 102(2) of the ITAA 1936 where the creator of a trust has power to revoke the trust and obtain a beneficial interest in the income or property of the trust estate.
No circumstances exist to show that the Commissioner should not exercise his discretion to assess the trustee.
Applying paragraph 102(1)(a) of the ITAA 1936, the trustee would be assessed and liable to pay tax calculated under section 102(2) of the ITAA 1936.