Private ruling: Capital gains tax - Deceased estate - Passing assets to specified Fund
Ruling period: 2010-11 income year | 2011-12 income year | 2012-13 income year | 2013-14 income year
Date scheme commenced: 1 July 2010

Ruling: Q1:  | A1:  | Q2:  | A2: 

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are an Australian resident. You have a share portfolio which has significant unrealised capital gains. You wish to maximise the value of the benefit that your estate can provide to your beneficiary (a gift deductible charity). You have re-drafted your will in accordance with advice that you have received from a Trustee company in a letter. Your new will provides for the disposal of the residue of your estate to a specified fund (the Fund). The Fund is endorsed as a deductible gift recipient. Your new will expresses the wish, but not obligation that your gift to the Fund be held as an Account within the trusts of the Fund and that the endowment be applied in perpetuity for the benefit of your beneficiary (a gift deductible charity). The following documents are to be read with and form part of the description of the scheme for the purpose of this ruling: · Your last will and testament · Letter from the Trustee company Assumptions You will pass away during the period covered by this ruling. At least some of the shares that you own when you pass away will pass to the Fund in accordance with your will.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 30-15, | Income Tax Assessment Act 1997 Section 102-20, | Income Tax Assessment Act 1997 Section 102-22, | Income Tax Assessment Act 1997 Section 102-23, | Income Tax Assessment Act 1997 Section 104-215, | Income Tax Assessment Act 1997 Section 118-60, | Income Tax Assessment Act 1997 Section 128-10 and | Income Tax Assessment Act 1997 Section 128-20.

Reasons for decision: Summary: CGT event K3 will happen to the shares that pass to the Fund. | Detailed Reasoning - The effect of death: Division 128 of the ITAA 1997 provides a series of roll-overs in respect of assets that a person owns when they pass away. The effect of the roll-overs is to transfer the deceased person's unrealised capital gains and capital losses in respect of these assets (if any) to their legal personal representative and then onto the beneficiaries who receive the assets from the estate. The legal personal representative or beneficiary may then be liable for that tax when a later CGT event happens to the asset. However, some beneficiaries are not subject to income tax (including capital gains tax) in Australia (for example, exempt entities). Where the roll-over due to a person passing away would transfer the unrealised capital gain or capital loss on an asset to someone who is exempt from income tax, the roll-over is withdrawn and CGT event K3 happens instead. The deceased person makes the capital gain or capital loss under CGT event K3 just before they pass away. This CGT event still happens even if any capital gain or capital loss you make from the event is disregarded. | Detailed Reasoning - Application to your situation: At least some of the shares that you own when you pass away will pass to the Fund in accordance with your will and the Fund is a tax exempt entity. The passing of the shares to the Fund meets the conditions for the application of CGT event K3 to these shares. CGT event K3 will happen just before you pass away. | Summary: Any capital gain or capital loss you make from CGT event K3 happening to the shares will be disregarded. | Detailed Reasoning - Detailed reasoning: You can generally claim a deduction for gifts made to organisations that are listed on the register of deductible gift recipients, however, testamentary gifts are generally not deductible. A capital gain or capital loss made from a testamentary gift of property that would have been deductible as a gift if it hadn't been a testamentary gift is disregarded. | Detailed Reasoning - Application to your situation: The Fund is endorsed as a deductible gift recipient. Gifts made to it are generally deductible, however, neither you nor your estate will be entitled to claim a gift deduction when the shares are transferred from your estate to the Fund. The passing of the shares to the Fund meets the conditions for the exemption to apply to any capital gain or capital loss you make from CGT event K3 happening to these shares.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Subject: Capital gains tax - Deceased estate - Passing assets to specified Fund: Question 1: Will CGT event K3 happen to the shares that pass to the Fund? | Question 2: Will any capital gain or capital loss you make from CGT event K3 happening to the shares be disregarded? | Reasons for decision: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.