Private ruling: CGT - deceased estate
Date of advice: 1 April 2026
Published: 9 June 2026
Ruling period: Income year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are capital gains or losses that are made when property owned by the deceased pass from the deceased estate to the beneficiary disregarded under subsection 118-60(1) of the Income Tax Assessment Act 1997 (ITAA 1997) if the beneficiary is a deductible gift recipient? | A1: Yes. | Q2: Are capital gains or losses that are made when property owned by the deceased pass from the deceased estate to the beneficiary taxable if the beneficiary is an income tax exempt entity? | A2: Yes , a capital gain is to be included in the final tax return of the deceased that is lodged by the executor of the estate.

Relevant facts and circumstances: 1. The Taxpayers are Australian residents. 2. The Taxpayers own the Property. 3. The Property was acquired after 20 September 1985. 4. The Taxpayers are undertaking their estate planning. 5. Upon the Taxpayers passing they wish to leave the Property to an organisation so that it can be used to further causes that they support. 6. The organisation will be an exempt entity for the purposes of the ITAA 1997. 7. The Taxpayers wishes will be conveyed in valid wills.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 30-15 | Income Tax Assessment Act 1997 section 104-215 | Income Tax Assessment Act 1997 section 118-60 | Income Tax Assessment Act 1997 section 128-10 | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: Question s 1 and 2 | Detailed Reasoning - Detailed reasoning: When a person dies, any capital gain or loss made by them in respect of a CGT asset they owned just before dying is disregarded, unless CGT event K3 applies (sections 128-10 and 104-215 of the ITAA 1997). Subsection 104-215(1) of the ITAA 1997 relevantly states that 'CGT event K3 happens if you die and a CGT asset you owned just before dying passes to a beneficiary in your estate who (when the asset passes): (a) is an exempt entity...'. Subsection 995-1(1) of the ITAA 1997 provides that an exempt entity is: (a) an entity all of whose ordinary income and statutory income is exempt from income tax because of this Act or because of another Commonwealth law, no matter what kind of ordinary income or statutory income the entity might have; or (b) an untaxable Commonwealth entity. Subsection 128-20(1) of the ITAA 1997 relevantly states that 'a CGT asset passes to a beneficiary in your estate if the beneficiary becomes the owner of the asset under your will'. Subsection 104-215(3) of the ITAA 1997 states that 'the time of the event is just before you die'. Subsection 104-215(4) of the ITAA 1997 provides that 'the trustee of the estate must include in the date of death return any net capital gain for the income year when you died'. ATO ID 2004/458 Income tax: Capital Gains Tax: CGT Event K3 - assets pass to a tax exempt testamentary trust provides the following about the operation of CGT event K3: CGT event K3 happens if a CGT asset owned by a deceased person just before they died passes to a beneficiary in their estate that is an exempt entity when the asset passes (paragraph 104-215(1)(a) of the ITAA 1997). The time of the event is just before the deceased died which means that any resulting capital gain or loss is accounted for in the final income tax return lodged on behalf of the deceased (referred to as the 'date of death' return) (subsection 104-215(3) of the ITAA 1997). Subsection 118-60(1) of the ITAA 1997 states that 'a capital gain or capital loss made from a testamentary gift of property that would have been deductible under section 30-15 if it had not been a testamentary gift is disregarded'. Subsection 30-15(1) of the ITAA 1997 provides a deduction for gifts and contributions made in the situations set out in the table in subsection 30-15(2) of the ITAA 1997. Subsection 30-15(2) of the ITAA 1997 provides that a testamentary gift or contribution is not deductible under section 30-15 of the ITAA 1997. Item 1 of the table in section 30-15(2) of the ITAA 1997 allows a deduction for a gift of property to an endorsed deductible gift recipient where relevant conditions set out in the table are satisfied. The Taxpayers would have been entitled to claim a deduction under section 30-15 of the ITAA 1997 if they had gifted the Property to a deductible gift recipient during their lifetime. Therefore, subsection 118-60(1) of the ITAA 1997 would operate to disregard any capital gain or loss arising from CGT event K3 when the Property passes to the deductible gift recipient (which will be an exempt entity) in accordance with the will of the deceased Taxpayer. Alternatively, if the Property passes under the will of the deceased Taxpayer to an exempt entity (that is not a deductible gift recipient), CGT event K3 would happen just before they died and the trustee for their estate would need to include any capital gain or loss from the CGT event in the final return of the deceased which they lodge on their behalf.