Private ruling: Deceased estates - CGT for transfer of property to a testamentary trust
Date of advice: 16 March 2021
Published: May 2021
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will subsection 128-15(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the transfer of the property by the executors of the estate to the corporate trustee of the testamentary trust, such that the capital gain on the transfer will be disregarded under subsection 128-15(3) of the ITAA 1997? | A1: Yes Division 128 of the ITAA 1997 deals with CGT consequences that arise from a deceased estate. Any capital gain or loss made by the trustee of a deceased estate is disregarded under section 128-15 of the ITAA 1997 if an asset of the estate 'passes' to a beneficiary in accordance with section 128-20. An asset will 'pass' to a beneficiary if they become the owner of an asset under a will (paragraph 128-20(1)(a)). In this case, transfer of property to the corporate trustee of the testamentary trust is pursuant to the terms of the will of the deceased and will be taken to have 'passed' under section 128-20 when the transfer is affected. Therefore section 128-15 applies to disregard any capital gain or loss made by the Trustee of the Estate.

Relevant facts and circumstances: The deceased passed away on XX XXXX 20XX. The deceased left a will dated XX XXXX 20XX, which contained a trust deed in part X for a Testamentary Trust (Trust A). The executors of the deceased estate are Person B, Person C and Person D. Under the terms of this will a testamentary trust will be created, Trust A, which the primary beneficiaries are the deceased's children, grandchildren and their lineal descendants. The trustees of Trust A are set out in the will to be Person B, Person C and Person D, with Person D to be the appointer of this trust. Under clause XX of the trust deed the appointer has the ability to remove and appoint or substitute any Trustee or Trustees. Trust A was established in XXXX 20XX, with a bank account opened in the trust's name. Company A was registered with ASIC on XX XXXX 20XX. Prior to the transfer of property from the deceased estate to Trust A under clause XX of the deceased's will. The trustees of Trust A will be replaced by a corporate trustee (Company A), with written approval and authorisation by the appointer of this trust (Person D).