Private ruling: Capital gains tax - deceased estates
Date of advice: 12 September 2025
Published: 17 November 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 30 June 20XX

Ruling: Q1: Can you claim a foreign income tax offset (FITO) under Division 770 of the Income Tax Assessment Act 1997 (ITAA 1997) for the Country A capital gains tax (CGT) you paid in relation to the property to the extent the capital gain is included in your income for Australian tax purposes? | A1: Yes | Q2: Can you disregard any capital gain on the sale of personal assets from the property? | A2: Yes

Relevant facts and circumstances: Parent A acquired a property in Country A in approximately 19XX. The property was the home of your parents and you and your siblings whilst growing up. You left the property in 19XX when you moved to Australia. Parent B passed away in 19XX. Following the death of Parent A, the Property was transferred to you, Parent B and your siblings in equal shares. Parent A and Parent B always resided in Country A. Parent B passed away in 20XX. Following your Parent B's death, their share of the Property was transferred to you and your siblings. You made a verbal agreement with your siblings to sell the Property in 20XX. One of your siblings subsequently passed away. As a result, an advance payment was made to their spouse in 20XX, representing their share of the sale proceeds from the property. The Property was sold in 20XX. Your share of the capital gain on the sale of the property is approximately Australian dollars. You also sold your personal belongings from the property. These belongings included a lounge set, television, microwave, oven, dining table set, beds, wardrobes, dressers, and other household items.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 108-20 | Income Tax Assessment Act 1997 section 118-10 | Income Tax Assessment Act 1997 section 770-15 | Income Tax Assessment Act 1997 Division 770 | International Tax Agreements Act 1953

Reasons for decision: Summary: You can claim a FITO for the Country A CGT you paid in relation to the property to the extent the capital gain is included in your income for Australian tax purposes. | Detailed Reasoning - Detailed reasoning: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. As a resident of Australia for taxation purposes, you are assessable on your income derived both in and out of Australia. If your assessable income in Australia is also subject to foreign income tax and you have, or are deemed to have, paid the foreign income tax in the relevant income year, you may be entitled to a foreign income tax offset (FITO) in Australia. The concept of 'foreign income tax' is intended to cover foreign taxes imposed on a basis that is substantially equivalent to income tax imposed under Australian law. Foreign income tax is defined in section 770-15 of the ITAA 1997 as a tax imposed by law other than Australian law that is: • tax on income; or • tax on profits or gains, whether of an income or capital nature; or • any other tax, being a tax that is subject to an agreement having the force of law and the International Tax Agreements Act 1953. The foreign country Double Tax Agreements (DTA's) are given legal effect through the International Tax Agreements Act 1953 . In considering whether an amount withheld from your salary is a 'foreign income tax', it is necessary to consider the basis on which the amount is withheld and any future benefit the taxpayer might derive in respect of the withheld amount. Article 2 of the Agreement between the Government of Australia and the Government of Country A for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the Agreement) states that the Agreement will apply to tax in Country A, being income tax and surtax imposed on chargeable profits of companies. If a taxpayer pays foreign tax on a foreign capital gain, the offset is available provided that the gain is taken into account in determining the taxpayer's net capital gain for the year. This was considered in the case of Burton v FC of T 2019 ATC 20-709; [2019] FCAFC 141. In Burton, the taxpayer derived capital gains from investments made in the United States. Those gains were taxed at source under the United States income tax law and Mr Burton paid the applicable United States tax. By virtue of Mr Burton's residence, the gains were also taxable in Australia as capital gains but were subject to a 50% discount as the investments had been held for more than a year. In that case, the Commissioner argued that since only 50% of the capital gain was included in the taxpayer's assessable income, only 50% of the amount of the United States tax paid should count towards the FITO. | Detailed Reasoning - Application to your circumstances: As a resident of Australia for tax purposes, you are required to declare your worldwide income in your Australian tax return. You will include the net capital gain from the sale of the property in your 20XX income tax return after applying any available discounts. As only a percentage of the capital gain from the sale of the property will be included in your assessable income in Australia, you are only eligible for a FITO equivalent to the tax paid on the capital gain in Australia. The FITO may be less than the amount of tax paid in Country A on the sale of the property. | Summary: You can disregard any capital gain on disposal of your personal use assets as they were acquired for $10,000 or less. | Detailed Reasoning - Detailed reasoning: Subsection 108-20(1) of the ITAA 1997 provides that a personal use asset is: (a) A CGT asset (except a collectable) that is used or kept mainly for your (or your associate's) personal use or enjoyment; or (b) An option or right to acquire a CGT asset of that kind; or (c) A debt arising from a CGT event in which the CGT asset the subject of the event was one covered by paragraph (a); or (d) A debt arising other than; (i) In the course of gaining or producing your assessable income; or (ii) From your carrying on a business. You can disregard any capital gain from a personal use asset acquired for $10,000 or less. You can also disregard any loss from a personal use asset. | Detailed Reasoning - Application to your circumstances: You sold a number of personal use assets from the property including a lounge set, television, microwave, oven, dining table set, beds, wardrobes, dressers and other household items. As all of these items were acquired for $10,000 or less, including items sold as a set, you can disregard any capital gain on disposal of the items.