Private ruling: Capital gains tax
Published: June 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Question and answer | Can the Commissioner exercise discretion to disregard any capital gain or loss made on the inadvertent disposal of shares from a deceased estate? | No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-5 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 128-15.

Reasons for decision: Summary: Capital gains tax (CGT) and deceased estates A capital gain or loss is made when a CGT event happens to a CGT asset. Shares purchased after 19 September 1985 are CGT assets. The most common event is CGT event A1, which happens when a CGT asset is disposed of to another person or entity. Upon death, the ownership of a deceased persons CGT assets can pass either: · directly to their legal personal representative or to a beneficiary; or · from their legal personal representative to a beneficiary. If a legal personal representative or executor sells the CGT asset(s) of a deceased estate, any capital gain or loss made on the disposal must be declared (subject to some exceptions that do not involve shares). | Detailed Reasoning - Commissioner's Discretion: The Commissioner has certain powers, also known as discretions, to do certain things as he sees fit. However, he can only exercise discretion where there is provision in the legislation which allows him to do so. These discretions are specific and (for example) include the discretion to remit penalties or extend the lodgment date for a return. A discretion to ignore a CGT event is not included in the legislation. | Detailed Reasoning - Application to your circumstances: In your case, due to a misunderstanding, your financial planner sold all the shares from the deceased's estate rather than transferring them to the beneficiaries as expected. When you were notified that this had occurred, you immediately instructed that they be re-purchased. A CGT event A1 occurred when the shares were sold. We understand that you did not intend for the shares to be sold, however, when they were, a CGT event took place. You have requested that the Commissioner apply a discretion to disregard any capital gain on the sale of the shares. However, as the Commissioner does not have any discretion to ignore a CGT event, he is unable to exercise such a discretion, and any capital gain or loss made on the disposal of the shares cannot be ignored.

Relevant facts: The deceased held a large parcel of shares when they died. | All shares were acquired after 20 September 1985. | Following the grant of probate you instructed your advisors to transfer the shares to the beneficiaries. | The solicitor instructed the financial planner to close all accounts in the deceased's name. Acting on these instructions all of the estate shares were sold. | There was never an intention for the shares to be sold so when you were notified, you immediately instructed that they be re-purchased. | Most shares were re-purchased that day or the following days, in the quantities originally held.