Commissioner's discretion under subsection 99A(2) of the Income Tax Assessment Act 1936 - Receiver and manager appointed to unit trust

Can the Commissioner exercise his discretion, under subsection 99A(2) of the Income Tax Assessment Act 1936 (ITAA 1936), not to apply section 99A of the ITAA 1936, where a receiver and manager has been appointed to the unit trust other than under the Bankruptcy Act 1966 ?

No. The Commissioner does not the discretion under subsection 99A(2) of the ITAA 1936 not to apply section 99A of the ITAA 1936 to the net income of the unit trust where a receiver and manager has been appointed to the unit trust other than under the Bankruptcy Act.

The unit trust operated a business. A receiver and manager was appointed to carry on and arrange the sale of the business. The appointment was not made under the Bankruptcy Act .

The disposal of the business will give rise to a net capital gain which will be included in the net income of the unit trust. The proceeds of the sale, net of tax, must be used to pay outstanding creditors.

The beneficiaries of the unit trust will not be presently entitled to the net capital gain.

Paragraph 99A(2)(b) of the ITAA 1936 allows the Commissioner not to apply section 99A of the ITAA 1936 in relation to a trust estate: 'that consists of the property of a person who has become bankrupt, being property that has vested in The Official Receiver in Bankruptcy, or in a registered trustee, under the Bankruptcy Act 1966 .'

As the receiver and manager was not appointed under the Bankruptcy Act, the Commissioner does not have any discretion to disregard the application of section 99A of the ITAA 1936 to this unit trust. The trustee is assessable under section 99A of the ITAA 1936 on the unit trust's net income to which no beneficiary is presently entitled.