1 Will the distribution to you of your one-half share of the Trust Fund (after the payment of specific gifts, taxes and other expenses) be included in your assessable income under subsection 99B(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?
Yes. Question 2 Will the amount included in your assessable income under subsection 99B(1) of the ITAA 1936 be wholly reduced under paragraph 99B(2)(a) of the ITAA 1936? Answer Yes. Having regard to the accounting and bookkeeping information of the Trust Fund you have provided, the Commissioner is satisfied that the distribution to you will be wholly composed of only the original corpus of the Trust Fund. On the basis that the distribution you receive will only be sourced from capital proceeds which represent the value of the original corpus of the Trust Fund and not the gain on that corpus, the Commissioner does not consider that any of the distribution will be attributable to amounts derived by the Trust which would be included in the assessable income of a hypothetical resident taxpayer. As such, the amount included in your assessable income under subsection 99B(1) of the ITAA 1936 will be wholly reduced by the amount of the corpus distribution you will receive under paragraph 99B(2)(a) of the ITAA 1936. This ruling applies for the following periods: 1 July 20XX - 30 June 20XX The scheme commenced on: 1 July 20XX
The taxpayer is a resident of Australia. The taxpayer is a beneficiary of a trust which was established in a foreign jurisdiction. The trustees of the Trust are residents in a foreign jurisdiction. The Trust was created by the taxpayers' parents, both residents in a foreign jurisdiction. The Trust was settled with real estate and preference shares in a resident company in a foreign jurisdiction. The taxpayers' parents are both deceased. Since the date of death of the last parent, the majority of the preference shares were redeemed for par value and all the real estate has been sold. The trustees are required to pay specific bequests to the grandchildren. The taxpayer and their sibling will each receive half the funds remaining in the Trust Fund. The draft trustee resolution proposes to pay the taxpayer's share of the Trust Fund from the Trust's corpus. The draft Balance Sheet states that the corpus of the Trust is the value of the assets settled on the trustees on settlement date of the Trust less distributions. You have provided the following documents and and these form part of the facts of this private ruling: • 'Trust Deed' creating the trust
• 'Distribution Deed' on Division Date. Per the Trust Deed, the trustees agree to hold the Trust Fund and administer it for the purposes listed and separates the purposes 'until the Division Date' and 'upon the Division Date'. The Division Date is the date of death of the last of the taxpayers parents to die. Until the Division Date, no one other than the taxpayers parents were entitled to receive any part of the net income or capital of the Trust Fund. The Trust Fund includes the settled property and any income derived from the assets comprising the Trust Fund; but excluding all amounts which have been paid or disbursed from the Trust Fund pursuant to the provision of the Trust. The Trust Deed allows the trustees at their discretion to make any distribution of net income or capital conferred by the Trust or by law for the benefit of any beneficiary, 'by way of cash, kind or in specie .' The Trust Deed gives the trustees discretion to pay out of the net income or capital of the Trust Fund, taxes, or other imposts payable in connection with the Trust Fund or payable by any beneficiary in respect of the Trust Fund.
The Trust Deed provides that on the Division Date the trustees shall distribute the remainder of the Trust Fund, if any, in favour of such person or persons as your parents direct by Distribution Deed. The Distribution Deed provides that the trustees are to distribute the assets as follows: • The trustees pay from the income or capital of the Trust Fund, or both, $X to each of the grandchildren. • After the payments to the grandchildren have been made, the trustees shall divide the remaining Trust Fund into two equal parts and pay one equal part to the taxpayer and their sibling.
Income Tax Assessment Act 1936 , section 99B(1) Income Tax Assessment Act 1936 , section 99B(2) Income Tax Assessment Act 1936 , paragraph 99B(2)(a)