Private ruling: Deceased estate
Date of advice: 14 May 2026
Published: 27 July 2026
Ruling period: Years ended 30 June 20xx and 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Will the Proposed Arrangement trigger any of the capital gains tax events A1, E5, E6 or E7 (sections 104-10, 104-75, 104-80, and 104-85 respectively) of the Income Tax Assessment Act 1997 [1] ? | A1: Decline to rule. The relevant CGT asset is not held by the Trustee of the deceased estates. | Q2: If the answer to Question 1 is yes, will any capital gain or loss be disregarded pursuant to subsection 128-15(3)? | A2: Decline to rule. The relevant CGT asset is not held by the Trustee of the deceased estates. | Q3: If the answer to Question 1 is yes, will the capital gain or loss be disregarded pursuant to section 118-195? | A3: No.

Relevant facts and circumstances: Background facts: 1. Individual 1 and Individual 2 are spouses and are the parents of Child 1 and Child 2. 2. Child 1 has X children. Family Home (the Property): 3. In 19xx, Individual 1 and Individual 2 purchased the Family Home (the Property), which was always utilised by them as their main residence. Estates of Individual 1 and Individual 2: 4. Individual 1 passed away on [date]. 5. After Individual 1's passing, Individual 2 continued to treat the Property as their main residence. Individual 2 passed away on [date]. 6. Neither Individual 1 or 2 were 'excluded foreign residents' just before the time of death. Relevant clauses of Individual 1 and 2's Wills: 7. Individual 1 and 2's Wills are in essence identical to each other. Specifically, clause X of Individual 1's Will states: Information provided. 8. Similarly, clause X of Individual 2's Will states: Information provided. 9. Clause X of Individual 1's Will provides that: Information provided. 10. Clause X of Individual 2's Will is essentially identical to clause X of Individual 1's Will in that it provides that upon the passing of Individual 1, their share of the Property will be held by Child 2 upon trust to allow Child 1 to reside in and receive income from. 11. Clause X of Individual 1's Will provides that: information provided. 12. Clause X of Individual 2's Will is in essence identical to clause X of Individual 1's Will in that it provides that upon their death and the deaths of Individual 1 and Child 1, the Trustee will hold the house and furniture upon trust as to both capital and income for Child 1's children. 13. Upon the passing each of Individual 1 and 2, Child 2 was appointed as the executor and trustee of their Estates under their respective Wills. 14. At the time of each of their deaths, the only asset of significance Individual 1 and 2 held was their X% share in the Property. 15. Since xxx, Child 1 has resided at the Property. Proposed Arrangement: 16. Following Individual 2's death on xxx and all of Child 1's children attaining the age of X, Child 1 and their X children, as Beneficiaries, have requested Child 2, as trustee, distribute the assets of the trusts. 17. Child 2 has received legal advice that, because all of the Beneficiaries between them have a vested and indefeasible interest in the Property, the Beneficiaries, acting together, may compel Child 2 to transfer the Property to them. Draft Deed of Direction to the Trustee (draft Deed): 18. A draft Deed of Direction to the Trustee (draft Deed) has been prepared by the beneficiaries of the Estates. The parties to the Deed are Child 1, Child 2 and the children of Child 1. Once executed, the Deed will require the trustee to cause Child 1's life interest in the Property to be registered on the title, and for Child 1's children to be registered on the title as remainder persons as tenants in common in equal shares. 19. Following the execution of the Deed and the registration of the respective interests of Child 1 and their children on the title of the Property, the testamentary trusts will come to an end.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-5 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 104-75 | Income Tax Assessment Act 1997 section 104-80 | Income Tax Assessment Act 1997 section 118-130 | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 section 128-15 | Income Tax Assessment Act 1997 section 128-20 | Income Tax Assessment Act 1997 subsection 955-1(1)

Reasons for decision: Detailed Reasoning - Question 1:: Will the Proposed Arrangement trigger any of the capital gains tax events A1, E5, E6 or E7 (sections 104-10, 104-75, 104-80, and 104-85 respectively)? | Detailed Reasoning - Distinction between deceased estate and a testamentary trust:: 1. Draft Taxation Determination TD 2026/D1 Income Tax: Deceased estates - meaning of 'right to occupy the dwelling under the deceased's will' in item 2(b) of column 3 of the table in subsection 118-195(1) of the Income Tax Assessment Act 1997 (TD 2026/D1) explains that there is an important distinction between a deceased estate and a testamentary trust. Specifically, paragraph 32 explains that 'a deceased estate is created upon the death of the deceased, whereas a testamentary trust arises only after the deceased estate has been administered.' | Detailed Reasoning - CGT events:: 2. Broadly, an entity makes a capital gain or loss where a CGT event occurs in relation to a CGT asset. Section 104-5 sets out a list of CGT events. If more than one CGT event happens, the most relevant event, being the one best matches the specific circumstances, is the one that will apply. | Detailed Reasoning - Disposal of a CGT asset: CGT event A1:: 3. CGT event A1 is the disposal of a CGT asset pursuant to subsection 104-10(1). Subsection 104-10(2) states that a taxpayer will dispose of a CGT asset if a change of ownership occurs from the taxpayer to another entity. [2] | Detailed Reasoning - Beneficiary becoming entitled to a trust asset: CGT event E5:: 4. Subsection 104-75(1) provides that CGT event E5 will occur if a beneficiary of a trust estate becomes absolutely entitled to a CGT asset of a trust as against the trustee. The timing of the event is when the beneficiary becomes absolutely entitled to the asset, pursuant to subsection 104-75(2). 5. Draft Taxation Ruling TR 2004/D25 Income Tax: capital gains: meaning of the words 'absolutely entitled to a CGT asset as against the trustee of a trust' as used in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997 (TR 2004/D25) provides guidance on the Commissioner's view on what would constitute absolute entitlement for the CGT provisions. In particular, paragraph 10 explains that a beneficiary will have an absolute entitlement to a CGT asset where the beneficiary has a vested and indefeasible interest in the entire trust asset, to call for the assets to be transferred to them or to be transferred at their direction. | Detailed Reasoning - Disposal to beneficiary to end income right: CGT event E6:: 6. Subsection 104-80(1) provides that CGT event E6 will occur when a trustee of a trust, other than a unit trust or a trust to which Division 128 applies, disposes of a CGT asset of a trust to a beneficiary in satisfaction of the beneficiary's right to receive ordinary income or statutory income from the trust. Broadly, Division 128 provides rules for what happens to assets of an individual who dies and are devolved to their personal legal representative or passes to a beneficiary of their estate. | Detailed Reasoning - Disposal to beneficiary to end income right: CGT event E7:: 7. Similarly, section 104-85 provides that CGT event E7 will happen if a trustee of a trust (except a unit trust or one which Division 128 applies) disposes of a CGT asset to a beneficiary in satisfaction of whole or part of a beneficiary's right to capital of the trust. | Detailed Reasoning - Distinction between deceased estate and a testamentary trust:: 8. To establish whether the identified CGT events would occur from the Proposed Arrangement, it is necessary to determine whether Individual 1 and 2's Wills provide that Child 2 holds the Property as trustee of a deceased estate or a trustee of a testamentary trust. 9. Broadly, Individual 1's Will gives their share of the Property to Child 2 to hold upon trust to allow Individual 2 to reside in during her lifetime and receive any net income from it. Specifically, clause 4 of Individual 1's Will provides: Information provided. 10. Similarly, Individual 2's Will gives their share of the Property to Child 2 to hold upon trust to allow Individual 1 (if living) to reside in and collect any income from. Specifically, clause 3 of Individual 2's Will states: Information provided. 11. Clause X of Individual 1's Will provides that, upon the passing of Individual 2, that Child 2 shall stand possessed of their share of the Property and hold it on trust to allow Child 1 to reside in and receive any net income from, stating that: Information provided. 12. Clause X of Individual 2's Will is essentially identical to clause X of Individual 1's Will in that it provides that upon the passing of Individual 1, Individual 2's share of the Property will be held by Child 2 upon trust to allow Child 1 to reside in and receive income from. 13. Clause X of Individual 1's Will provides that after Individual 2 and Child 1's death, Child 2 shall hold the Property on trust as to both income and capital for Child 1's children, stating that: Information provided 14. Both Wills stipulate that Child 2's role as trustee over the Property is not one of an executor of a deceased estate as they are not 'calling in' Individual 1 and 2's assets, paying their debts and then distributing the balance of the estates as bequeathed under the Wills to the beneficiaries. Rather, the above clauses of Individual 1 and 2's Wills stipulate that Child 2, as trustee, is to hold the Property upon trust and to allow the surviving spouse, and upon the surviving spouse's death, Child 1, to reside in and collect any income derived from the Property. Subsequently, upon the deaths of the surviving spouse and Child 1, the Wills provide that Child 1 is to hold the Property upon trust as to both income and capital for Child 1's children. Therefore, Child 2's duties with regards to the Property is to hold it on trusts, commonly known as testamentary trusts, for the benefit of the Beneficiaries as described above. 15. As trustee of the X testamentary trusts established under the Wills, Child 2 does not meet the definition of legal personal representative pursuant to subsection 995-1(1). However, in accordance with PS LA 2003/12, it is the Commissioner's administrative practice to treat the trustee of a testamentary trust in the same manner as a legal personal representative for the purposes of Division 128. | Detailed Reasoning - CGT events:: 16. Under the Proposed Arrangement, the Beneficiaries and Trustee of both the testamentary trusts will execute the draft Deed which will require the Trustee to cause Child 1's life interest in the Property to be registered on the title, and for Child 1's children to be registered on the title as remainder persons as tenants in common in equal shares. 17. The Property is held by Child 2, as trustee of the testamentary trusts set up by Individual 1 and 2's Wills and not as the trustee of the deceased estates. You have not agreed for the trustee of the testamentary trusts to be a party to this ruling. The Commissioner is unable to rule on whether any potential CGT event from the Proposed Arrangement will be made by an entity that is not a party to the ruling. | Detailed Reasoning - Question 2:: If the answer to Question 1 is yes, will any capital gain or loss be disregarded pursuant to subsection 128-15(3)? | Detailed Reasoning - Capital gains tax - effect of death:: 18. Broadly, Division 128 provides the CGT consequences of what happens to a CGT asset owned just before the death of an individual and that asset devolves to their legal personal representative or a beneficiary of their estate. | Detailed Reasoning - Effect of legal personal representative or beneficiary:: 19. Subsections 128-15(1) and (2) provide that if a CGT asset owned by an individual devolves to their legal personal representative or passes to a beneficiary of their estate, the legal personal representative or beneficiary are taken to have acquired the asset on the day the individual died. 20. Subsection 995-1(1) provides the following as the definition of the term 'legal personal representative: (a) an executor or administrator of an estate of an individual who has died; or (b) a trustee of an estate of an individual who is under a legal disability; or (c) a person who holds a general power of attorney that was granted by another person. 21. Subsection 128-15(3) provides that any capital gain or loss made by a personal legal representative if the asset passes to a beneficiary is disregarded. 22. Section 128-20 provides the circumstances in which a CGT asset passes to a beneficiary and includes where the beneficiary becomes owner of the asset under a will. 23. Law Administration Practice Statement PS LA 2003/12 Capital gains tax treatment of the trustee of a testamentary trust (PS LA 2003/12) [3] provides guidance to ATO staff in relation to the CGT treatment of trustees of testamentary trusts. Paragraphs 1 and 2 of PS LA 2003/12 state: | Detailed Reasoning - 1. What is this Practice Statement about?: This Practice Statement confirms the Commissioner's long-standing administrative practice of treating the trustee of a testamentary trust in the same way as a legal personal representative for the purposes of Division 128 of the Income Tax Assessment Act 1997 (ITAA 1997), in particular subsection 128-15(3). | Detailed Reasoning - 2. What is the effect of the practice for the trustee of a testamentary trust?: Broadly stated, the ATO's practice is to not recognise any taxing point in relation to assets owned by a deceased person until they cease to be owned by the beneficiaries named in the will (unless there is an earlier disposal by the legal personal representative or testamentary trustee to a third party or CGT event K3 applies). | Detailed Reasoning - Application to your circumstances:: 24. Consistent with PS LA 2003/12, the trustee of the testamentary trusts will be treated in the same manner as the legal personal representative of the deceased Estates of Individual 1 and 2 for the purposes of Division 128. 25. As explained in Question 1, Child 2, as trustee of the testamentary trusts, is not a party to this ruling and the Commissioner is unable to rule on this question. | Detailed Reasoning - Question 3:: If the answer to Question 1 is yes, will the capital gain or loss be disregarded pursuant to section 118-195? | Detailed Reasoning - Dwelling acquired from a deceased estate:: 1. Section 118-195 provides that a capital gain or loss you make relating from a CGT event happening to a dwelling, or your ownership interest in it, is disregarded if: (a) you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and (b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied; and Table 1 : Beneficiary or trustee of deceased estate acquiring interest | Detailed Reasoning - And also one these item: 1 the deceased acquired the ownership interest on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death and was not then being used for the purpose of producing assessable income your ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner 2 the deceased acquired the ownership interest before 20 September 1985 the dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of: (a) the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or (b) an individual who had a right to occupy the dwelling under the deceased's will; or (c) if the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary - that individual. (c) the deceased was not an excluded foreign resident just before the deceased's death. Note 1: You may make a capital gain or capital loss if the dwelling was used for the purpose of producing assessable income: see section 118-190. Note 2: In some cases the use of a dwelling to produce assessable income can be disregarded: see sections 118-145 and 118-190. Note 3: There are special rules for dwellings acquired before 7.30 pm on 20 August 1996. These rules also affect the operation of section 118-192 and subsections 118-190(4) and 118-200(4): see section 118-195 of the Income Tax (Transitional Provisions) Act 1997 . [emphasis added] | Detailed Reasoning - Meaning of the term ownership interest in relation to a dwelling:: 2. Relevantly, section 118-130 provides that you have an ownership interest in a dwelling [4] if you have a legal or equitable interest in the land on which it is erected or you have a right to occupy the dwelling. | Detailed Reasoning - Application to your circumstances:: 3. For a capital gain or loss to be disregarded pursuant to section 118-195, it is necessary for the Property to have passed to Child 2 in their capacity as a trustee of a deceased estate. TD 2026/D1 makes it clear that there is a distinction between a trustee of a deceased estate and a trustee of a testamentary trust for the purposes of subsection 118-195(1), that these are not the same entity. As explained in Question 1, Child 2 holds the Property as the trustee of two testamentary trusts created under the terms of Individual 1 and 2's Wills and not as trustee of deceased estates of Individual 1 or 2. Given this, the Proposed Arrangement does not involve a CGT event in relation to a dwelling held by the trustee of a deceased estate and section 118-195 is not applicable. [1] All future legislative references are to the Income Tax Assessment Act 1997 , unless otherwise stated. [2] However, subsection 104-10(2) of the ITAA 1997 also provides that a change in ownership will not occur is the taxpayer ceases to be the legal owner of the asset but continues to be its beneficial owner. [3] Law Administration Practice Statements (PS LAs) are written documents which provide direction and assistance to Tax Officers. They outline approaches to be undertaken by Tax Officers in performing their duties, including the application of the laws administered by the Commissioner. As they are internal documents providing guidance to Tax Officers, PS LAs do not contain interpretive information about tax law nor do they express a precedential view. The Commissioner makes LAPS publicly available in the interest of open tax administration. [4] that is not a flat or home unit.