1 Will the legacy beneficiaries in the will of the deceased be presently entitled to income of the trust for the income tax year ended 30 June 20XX for the purposes of Division 6 of the Income Tax Assessment Act 1936 (ITAA 1936)?
No. Question 2 Will the residual beneficiaries in the will of the deceased be presently entitled to income of the trust for the income tax year ended 30 June 20XX for the purposes of Division 6 of the ITAA 1936? Answer Yes. Question 3 Will any part of the net income of the estate of the deceased be included in the assessable income of the trustee of the estate of the deceased in accordance with section 99 of the ITAA 1936? Answer Yes. Question 4 Will any part of the net income of the estate of the deceased be included in the assessable income of the trustee of the estate of the deceased in accordance with section 99A of the ITAA 1936? Answer No. This ruling applies for the following periods : 30 June 20XX 30 June 20XX The scheme commenced on: 1 July 20XX
The deceased passed away on DD MM YYYY. The deceased had left a will dated DD MM YYYY that nominated their children as beneficiaries and their grandchildren should their children predecease them leaving resulting grandchildren. Any grandchild who would receive a benefit under the will would receive lesser or what their parent would have received or $XX per clause X of the will. For the purposes of this ruling the grandchildren are identified as the legacy beneficiaries and the children are the residual beneficiaries. None of the beneficiaries are under a legal disability and one of the legacy beneficiaries is a non-resident. Probate for the estate of the deceased was granted on DD MM YYYY. All assets were realised by the executor of the estate between DD MM YYYY and DD MM YYYY. The assets held by the deceased included cash, a primary residence, a refundable accommodation deposit, a loan to a residual beneficiary and a share portfolio. Income of the trust between the date of death and the granting of probate included bank account interest and dividends and distributions from the share portfolio.
Income of the trust between the granting of probate and DD MM YYYY also included bank account interest, dividends and distributions from the share portfolio along with the gain on the sale of the share portfolio and interest on the refundable accommodation deposit. The gain on the sale of the assets has been included in the income of the trust. The funeral costs, tax instalments and other known debts of the deceased were paid prior to DD MM YYYY. In DD MM YYYY, each of the beneficiaries executed a deed of release and indemnity to indemnify the executor prior to receiving distributions from the estate. On DD MM YYYY payments of $XX to each of the legacy beneficiaries were made per subclause X of the will. On DD MM YYYY payments of $X were made to five of the residual beneficiaries with the sixth residual beneficiary receiving $X as interim distributions. At the date of death, the deceased's assets were valued at approximately $X. The estate held total assets and income of approximately $X at the beginning of DD MM YYYY, prior to any distributions being made. No further distributions have been made from the estate.
The estate continues to receive interest on the bank accounts subsequent to the distributions in DD MM YYYY and DD MM YYYY. As at DD MM YYYY, the estate is not fully administered as taxation and other costs along with distribution matters have not been finalised. The estate will continue to incur accounting and legal fees until the taxation and distribution issues are settled. The residue of the estate cannot be ascertained at this point and the residual beneficiaries are not presently entitled to the balance of the estate assets at this time and are not entitled to demand immediate payment of any income of the estate. Assumptions The executor of the estate intended to make the distribution to the legacy beneficiaries out of the corpus of the estate of the deceased. The executor of the estate intended to make the distribution to the residual beneficiaries out of a combination of corpus and income of the estate of the deceased.
Income Tax Assessment Act 1936 section 97 Income Tax Assessment Act 1936 section 99 Income Tax Assessment Act 1936 section 99A Question 1 Will the legacy beneficiaries in the will of the deceased be presently entitled to income of the trust for the income tax year ended 30 June 20XX for the purposes of Division 6 of the Income Tax Assessment Act 1936 (ITAA 1936)? Answer No. Detailed reasoning Present entitlement is not a defined term in the ITAA 1936 and as such takes its meaning from common law. The High Court of Australia has provided in FC of T v Whiting (1943) 68 CLR 199 (Whiting's Case) a definition of present entitlement. The High Court held that a residual beneficiary of a deceased estate cannot be presently entitled to the income of the trust estate until the estate has been fully