Private ruling: Capital gains tax - deceased estate - section 99
Date of advice: 16 December 2025
Published: 9 February 2026
Ruling period: Year ending 30 June 20YY
Date scheme commenced: DD January 20YY

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

Relevant facts and circumstances: The deceased died in Country A more than 2 years ago. The deceased was a tax resident of Country A at the time of their death and for some years prior. Probate of the deceased's Country A language Will was granted to the executor, also a Country A tax resident, soon after the deceased's death. (Original documents were authenticated by the Supreme Court on DD MM 20YY). The deceased owned a residential Property located in Australia. The deceased's estate comprised of the Property. The Property was acquired by the deceased in 19YY. The Property was bequeathed, under the deceased's Will to their first child. The deceased lived and worked in Australia for a period of time, which is when the Property was acquired. The property was used by the deceased's spouse and child until the child finished their schooling. The Property became an investment property, in approximately MM 19YY, many years prior to the deceased's death. The executor identified that the deceased had not been lodging Australian tax returns, other than the year ending 30 June 20YY. This has been rectified with all outstanding returns lodged and tax paid. The executor obtained rental statements going back to 20YY. Prior to 20YY it appears the deceased had a private rental arrangement, if at all. To ensure any possible tax liability was met, the executor obtained rental appraisals dating back to 19YY, and lodged tax returns based on nil deductions for the entire period. The property was sold on DD MM 20YY and settled a month later on DD MM 20YY. The estate received rental income in the 20YY income year, as well as the capital gain from the sale of the property. No beneficiary was presently entitled to the income generated by the estate. The capital gain will not be streamed to the beneficiaries pursuant to Subdivision 115-C of the ITAA 1997. The estate assets only included assets the deceased owned at their date of death. The Commissioner has exercised the discretion under Subsection 99A(2) of the Income Tax Assessment Act 1936 (ITAA 1936) to tax the next income of the trust estate to which no beneficiary is presently entitled to, under section 99 of the ITAA 1936 for the 2024 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 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 is deemed to have acquired the asset when the deceased acquired it, for the purposes of meeting the 12 month ownership requirement. 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.