Tuesday, October 26, 2021

When 2 trusts become 1**

Following last week’s post I was reminded of a further Tax Office private ruling that looked at the amalgamation of 2 testamentary trusts ‘post death’, namely ruling number 1012622867641.

Broadly the situation was as follows:
  1. Two separate trusts were created for two minors using cash sourced from a superannuation death benefit paid when their parent passed away intestate.
  2. Primarily to reduce the administration costs, the trustee wanted to merge the two trusts, with the entitlements of the beneficiaries’ in the new trust maintained.
The Tax Act creates access to ‘excepted trust income’ in a range of situations, including where:
‘… the assessable income of a trust estate…in relation to a beneficiary of the trust estate to the extent to which the amount…is derived by the trustee of the trust estate from the investment of any property transferred to the trustee for the benefit of the beneficiary… directly as the result of the death of a person and out of a provident, benefit, superannuation or retirement fund…’
Here the Tax Office confirmed that the combined trust could not change the status of the excepted trust income, primarily because it continued to satisfy the above quoted provisions.

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** for the trainspotters, the title today is riffed from the Spice Girls song ‘2 become 1’. View hear (sic):