Private ruling: Capital gains tax
Published: November 2014
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Did you acquire your interest in the various parcels of land prior to 19 September 1985? | A1: Yes.

Relevant facts and circumstances: Your late relative owned various parcels of land. Your late relative passed away before 1985. Under their will, a life interest in the net income of the estate was left to your other relative until their death or marriage. Under the will, you were entitled to the property after you reached 21 years of age. Your other late relative never remarried and the land was held in trust by lawyers until they passed away. At this point in time, your name was placed on each of the titles. Some of the titles have been split or merged for various reasons, but you have retained ownership.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-75 | Income Tax Assessment Act 1997 Division 128 | Income Tax Assessment Act 1997 section 128-20 | Income Tax Assessment Act 1997 subsection 128-15(2) | Income Tax Assessment Act 1997 section 109-5

Reasons for decision: Summary: Division 128 of the Income Tax Assessment Act 1997 (ITAA 1997) applies to the passing of an asset from a deceased individual's legal personal representative to a beneficiary in their estate (provided the asset was owned by the deceased individual at the time of their death). Accordingly, 'a trust to which Division 128 applies' requires more than the identification of the trust as a deceased estate. The Commissioner considers that the words 'a trust to which Division 128 applies' should be interpreted as a deceased estate to the extent that it is a trust over an asset originally owned by a deceased individual and which may pass to the beneficiary in accordance with section 128-20 of the ITAA 1997 (TR 2006/14). We consider that an asset can 'pass' to a beneficiary within the meaning of section 128-20 of the ITAA 1997 prior to legal transfer if the beneficiary becomes absolutely entitled to the asset as against the trustee (Taxation Determination TD 2004/3). For the purposes of applying Division 128 of the ITAA 1997, trustees of testamentary trusts same are treated in the same way as a legal personal representative (Practice Statement Law Administration PS LA 2003/12) | Detailed Reasoning - Acquisition date: In relation to assets that were owned by the deceased prior to their death, subsection 128-15(2) of the ITAA 1997 provides that you will be taken to have acquired those assets on the date of the deceased's death. This is as a result of the assets passing to you in accordance with section 128-20 of the ITAA 1997. | Detailed Reasoning - Application to your circumstances: In this case, when the deceased died, their assets were held under a testamentary trust subject to a life interest. As you held a remainder interest, you became absolutely entitled to assets of the testamentary trust following the death of your relative. When you became absolutely entitled to these assets they are taken to have 'passed' to you in accordance with section 128-20 of the ITAA 1997. As discussed above, this provision provides that you will be taken to have acquired the assets on the date of the deceased's death. Accordingly, the various parcels of the land that you have acquired will retain their pre-CGT status.