Private ruling: Deceased estate - capital proceeds
Date of advice: 28 October 2025
Published: 15 December 2025
Ruling period: Year ended 30 June 20YY
Date scheme commenced: DD MM 20YY

Ruling: Q1: Will the capital proceeds received by the Estate of Person B (Estate B) be assessable income if the Estate of Person A (Estate A) has already reported the capital gain on the sale of the property? | A1: No. Estate A has distributed the net proceeds from the sale of property to Estate B. The funds originated from the capital (corpus) of Estate A. Estate A has paid the Capital Gains Tax (CGT) liability on the disposal of the property (reducing the net proceeds). Estate B has received the net proceeds, which constitutes a capital distribution. It does not constitute ordinary income and is therefore not assessable under the statutory provisions of the legislation. Any interest earned by Estate B from the capital proceeds is considered assessable income.

Relevant facts and circumstances: Person A passed away on DD MM 20YY. Person B was named the beneficiary of the property located at the property. Person B (the deceased) passed away on DD MM 20YY. The administration of the Estate of Person A (Estate A) ran for several years and as a result the property was not transferred to the deceased prior to their death. The Estate of Person B (Estate B) and Estate A subsequently came to an agreement that Estate A would sell the property and distribute the net proceeds to the Estate B. The personal representatives for the Estate A entered a contract of sale for the property on DD MM 20YY. Settlement of the property occurred on DD MM 20YY. Pursuant to clause 8.9 of the will, the following adjustments were made at the time of payment of the net sale proceeds to Estate B: • an adjustment in favour of Estate A for the payment of principal and interest secured by mortgage (including the costs associated with the release of the mortgage) • an adjustment in favour of Estate B for the income received from date of death and • an adjustment in favour of Estate A for the outgoings paid from date of death. The personal representatives for Estate A engaged the estate accountants to provide an estimate of the CGT which is payable by the Estate A on the sale of the property. In MM 20YY, the net proceeds from the sale of the property were paid to Estate B. Estate B was informed by Estate A that the capital gain from the sale of the property will be included in the assessable income of Estate A in the 20YY income year, on the basis that the deceased was not absolutely entitled to the property nor specifically entitled to the capital gain. Estate B has not made any distributions to beneficiaries as of DD MM 20YY.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 6-5