Private ruling: Capital gains tax - deceased estate
Date of advice: 19 November 2025
Published: 5 January 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Does the 50% discount percentage under subparagraph 115-100(a)(ii) of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the capital gain on the sale of the 50% interest in the property? | A1: Yes.

Relevant facts and circumstances: The deceased died less than 2 years ago. The deceased previously lived in Australia and more than a decade ago, moved permanently to Country Y. At their date of death, they were a non-resident for Australian taxation purposes and had been since leaving Australia. The deceased was survived by 2 adult children, Person A and Person B. Person A currently lives in Country Y and is a non-resident for tax purposes and Person B lives in Australia and is a resident for tax purposes. Probate of the deceased's Will was granted to Person A as the named executor. The deceased held a 50% interest in a property located in Australia (the Australian property). The Australian property was sold by contract entered into at the end of the 20XX-XX income year with settlement taking place during the 20XX-XX income year. To date, the estate administration is still in progress and there are current court proceedings in progress in relation to a dispute between the 2 beneficiaries over the split of the estate's assets. The estimated taxable income for the estate for the year ended 30 June 20XX is approximately $xxx,xxx consisting of the net capital gain on the sale of the 50% interest in the property, after application of the 50% CGT discount of $xxx,xxx and rental income of $xx,xxx. As at 30 June 20XX, no beneficiaries were made presently entitled to the income of the estate. Also, no beneficiaries have been made specifically entitled to the capital gain. The executor has made an election under section 115-230 of the Income Tax Assessment Act 1997 to be taxed on the capital gain. There has been no transfer or acquisition of property by the estate. The estate borrowed $xx,xxx to pay testamentary expenses as follows: • $xx,xxx, a couple of months after date of death, to help pay the deceased's carer's compensation. • $xx,xxx, approximately X months after date of death to pay for disbursements including to obtain sworn valuations for the Estate properties. Apart from the above amounts, the estate has not borrowed or lent out any property or money. The Commissioner has exercised the discretion under subsection 99A(2) of the Income Tax Assessment Act 1936 (ITAA 1936) to tax the trustee of the trust estate under section 99 of the ITAA 1936 for the 2024-25 income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 115-5 | Income Tax Assessment Act 1997 section 115-10 | Income Tax Assessment Act 1997 section 115-25 | Income Tax Assessment Act 1997 section 115-30 | Income Tax Assessment Act 1997 subparagraph 115-100(a)(ii) | Income Tax Assessment Act 1997 section 115-120 | Income Tax Assessment Act 1997 section 115-222 | Income Tax Assessment Act 1997 section 115-230 | Income Tax Assessment Act 1936 section 98 | Income Tax Assessment Act 1936 section 99 | Income Tax Assessment Act 1936 section 99A

Reasons for decision: Summary: Section 115-10 of the ITAA 1997 includes a trust as a type of entity that is eligible to make a discount capital gain. A minimum 12 month ownership period is required for a discount capital gain (section 115-25 of the ITAA 1997). Section 115-30 of the ITAA 1997 provides that for a deceased estate asset that was acquired by the deceased after 19 September 1985, the legal personal representative (LPR) is deemed to have acquired the asset when the deceased acquired it, for the purposes of meeting the 12 month ownership requirement. If the deceased acquired the asset before 20 September 1985, the LPR is deemed to have acquired the asset when the deceased died. In this case, the capital gain on the sale of the property is a discount capital gain as per section 115-5 of the ITAA 1997 as it was made by a trust and the minimum 12 month ownership requirement has been met. The applicable 'discount percentage' is 50% as per subparagraph 115-100(a)(ii) of the ITAA 1997 as the gain was made by a trust (other than a complying superannuation entity). Section 115-120 of the ITAA 1997 does not apply to deny the discount because the trustee is not liable to be assessed under section 98 of the ITAA 1936. Rather the trustee will be assessed under either section 99 or section 99A of the ITAA 1936 as there is no beneficiary presently entitled to the income of the trust. Section 115-222 of the ITAA 1997 operates to remove the 50% CGT discount for trustees assessed under section 99A of the ITAA 1936, that is, where we have not exercised the section 99A discretion to assess the trustee under section 99 rather than section 99A of the ITAA 1936. In this case, the Commissioner has exercised the discretion to assess the trustee under section 99 rather than section 99A of the ITAA 1936. Therefore, section 115-222 of the ITAA 1997 will not operate to remove the 50% CGT discount. Consequently, in this case the trustee of the deceased estate will be entitled to the 50% CGT discount for the capital gain made on the disposal of the property.