Private ruling: Capital gains tax
Date of advice: 13 January 2021
Published: March 2021
Ruling period: Year ending 30 June 2021
Date scheme commenced: 1 July 2014

Ruling: Q1: Will the Properties 'pass' in accordance with section 128-20 of the Income Tax Assessment Act 1997 (ITAA 1997), such that section 128-15 of the ITAA 1997 will apply to disregard any capital gain or loss for the Trustee of the Estate? | 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 that is varied by a court order (paragraph 128-20(1)(a)). In this case, the Court made an Order for the Properties to be transferred to the beneficiaries following the dispute with the Estate. The transfer of the Properties to the beneficiaries under the Court Order are taken to have 'passed' under section 128-20 when the transfers are affected. Therefore section 128-15 applies to disregard any capital gain or loss made by the Trustee of the Estate.

Relevant facts and circumstances: On XX January 20XX the deceased passed away. On XX March 20XX probate of the Will of the deceased was granted to the Executor. The inventory in the estate included properties (the Properties). On XX September 20XX Beneficiary X and Beneficiary Y (the beneficiaries) commenced proceedings (Proceedings) against the Executor. On XX October 20XX judgment was delivered in the Proceedings ordering that the Properties be transferred to the beneficiaries.

Relevant legislative provisions: Section 104-10 of the Income Tax Assessment Act 1997 | Section 128-15 of the Income Tax Assessment Act 1997 | Section 128-20 of the Income Tax Assessment Act 1997