Private ruling: Deceased estates and capital gains tax
Date of advice: 30 May 2019
Published: July 2019
Ruling period: 1 July 2018 to 30 June 2019

Ruling: Q1: Will the executor of the deceased estate be able to disregard any capital gain or capital loss on the passing of the estate properties to the beneficiaries of the estate? | A1: Yes. Section 128-10 of the Income Assessment Act 1997 (ITAA 1997) states when a capital gains tax (CGT) asset that you owned just before you passed devolves to the legal representative or the beneficiary of your estate the capital gain or loss will be disregarded. Under subsection 128-15(2) of the ITAA 1997 the asset passes to the beneficiary or legal representative on the day you passed. Under subsection 128-15(3) of the ITAA 1997 any capital gain or loss the legal personal representative makes if the asset passes to a beneficiary in the estate is disregarded. In relation to this case, the assets will pass to the beneficiaries and any capital gain that the executor makes on the transfer is disregarded under subsection 128-15(3) of the ITAA 1997. However, any subsequent disposal of the assets by the beneficiaries is a CGT event which may result in a capital gain or loss.

Relevant facts and circumstances: The deceased lived in their main residence until they passed. The last will of the deceased left the entire estate to their spouse but due to the spouse not surviving them their children became executors and beneficiaries of the estate. The estate was to be distributed after all expenses were paid and proceeds were to be evenly distributed between the beneficiaries. If one of the beneficiaries did not survive them their share was to be distributed to their children. One beneficiary predeceased their parent and their share of the estate was to be distributed to their children. The executor will be acting within their powers to appropriate the property of the estate to satisfy the pecuniary interests of the beneficiaries under the will. The distribution of the assets will result in each beneficiary receiving an even share of the estate property.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 128-10 | Income Tax Assessment Act 1997 section 128-15 | Income Tax Assessment Act 1997 section 128-20