Private ruling: Deed of Arrangement
Date of advice: 24 February 2026
Published: 20 April 2026
Ruling period: Year ending 30 June 202X | Year ending 30 June 202X
Date scheme commenced: 1 July 202X

Ruling: Q1: Does the proposed Deed of Arrangement meet the requirements of section 128-20 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. Paragraph 128-20(1)(d) of the ITAA 1997 provides that a CGT asset passes to a beneficiary of a deceased estate if the beneficiary becomes the owner of the asset under a deed of arrangement where: (i) the beneficiary entered into the deed to settle a claim to participate in the distribution of the estate, and (ii) any consideration given by the beneficiary for the asset consisted only of the variation or waiver of a claim to one or more other CGT assets that formed part of the estate. In this case, the proposed Deed of Arrangement meets the requirements of section 128-20 of the ITAA 1997 as Beneficiary A will enter into it to settle their claims seeking further provision and assets from the estate, and the only consideration they will give is the variation or waiver of their claim to one or more other CGT assets of the estate. | Q2: Will the proposed transfer under the Deed of Arrangement to Beneficiary A of Asset Z that was owned by the deceased give rise to a CGT liability for the executors of the estate? | A2: No. Division 128 of the Income Tax Assessment Act 1997 (ITAA 1997) sets out special CGT rules for deceased estates. Under subsection 128-15(3) of the ITAA 1997 any capital gain or loss the legal personal representative makes if a CGT asset the deceased owned just before dying passes to a beneficiary in the estate is disregarded. As the proposed Deed of Arrangement meets the requirements of paragraph 128-20(1)(d) of the ITAA 1997, any capital gain that arises upon the transfer of Asset Z to Beneficiary A will be disregarded as it will have passed to them for the purposes of subsection 128-15(3) of the ITAA 1997.

Relevant facts and circumstances: The deceased died leaving a will, and a codicil. Probate was granted to the executors. The will left Asset Z to Beneficiary B. Beneficiary A commenced legal action claiming further provision, including Asset Z, from the estate. To settle these claims, the relevant parties propose to enter into the Deed of Arrangement. Entry into that Deed of Arrangement will put an end to the claims initiated by Beneficiary A. No property of the estate will go to any party who is not a beneficiary. No external consideration is being provided by any beneficiary in compensation for entering into the Deed of Arrangement. The administration of the estate will not be complete as at the date of entering into the Deed of Arrangement. The beneficiaries are Australian residents for taxation purposes.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 128-15 | Income Tax Assessment Act 1997 section 128-20