Private ruling: Pre-CGT assets
Date of advice: 14 August 2025
Published: 17 November 2025
Date scheme commenced: The date the Trust was settled

Ruling: Q1: Is the Commissioner satisfied, or thinks it reasonable to assume, that at all times on or after 20 September 1985 and up to the time of issue of this Ruling, that majority underlying interests in the Relevant Assets were had by natural persons/ultimate owners as the case may be who had majority underlying interests in the Relevant Assets immediately before 20 September 1985 under section 160ZZS of the Income Tax Assessment Act 1936 (ITAA 1936) and section 149-10 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes This private ruling applies for the following period: From 20 September 1985 to the date of issue of this Ruling The scheme commenced on: The date the Trust was settled

Relevant facts and circumstances: 1. The Trust was settled by deed (the Deed) before 20 September 1985. The Trust can generally be described as a discretionary trust. The Deed should be read with and forms part of the relevant facts and circumstances on which this Ruling is made. 2. At all relevant times, the Company (the Trustee) was the Trustee of the Trust. The Company was incorporated in Australia and so the Trust is a resident trust estate under subsection 95(1) of the ITAA 1936 and a resident trust for CGT purposes. 3. The Trustee's current directors are Individuals A, B and C who are foreign residents and Individual D who is an Australian resident. 4. The current shareholders of the Trustee are Individuals A and B. 5. Individual A and B are spouses and Individual C is their child. The Deed 6. The Trust was constituted by the original contribution paid by the Settlor to the Trustee. 7. The assets of the Trust comprise the original contribution and all further money or property paid to or received by the Trustees and the assets and investments for the time being and from time to time representing the same. 8. The beneficiaries of the Trust are (together referred to as the corpus beneficiaries in this Ruling): • The first corpus beneficiaries, means the children of individual A • The second corpus beneficiaries, means the grandchildren of Individual A • The third corpus beneficiaries, means Individual A's spouse or, if not living, Individual A's widow • The fourth corpus beneficiaries, means the parents of Individual A • The fifth corpus beneficiaries, means the brothers and sisters of Individual A • The sixth corpus beneficiaries, means the children of the brothers and sisters of Individual A. 9. The assets of the Trust shall be held by the Trustee, as to capital, for the first, second, third, fourth, fifth and sixth corpus beneficiaries as shall be living at the distribution date as the Trustee in their absolute discretion shall determine and in such shares between them or one or more to the exclusion of others as the Trustee determines. In default of determination, the capital is held for those of the first corpus beneficiaries as shall be living at the distribution date and if they have died for their surviving children (and making further provision for the capital to be held for other corpus beneficiaries in circumstances where the children have died). 10. The income derived for the first 21 years from date the Trust was settled was to be accumulated and added to corpus unless the Trustee decided to distribute in accordance with clause X or apply under clause Y. 11. Following the 21st anniversary (and if the Trustee decides not to accumulate in the first 21 years), the Trustee shall hold the income for such of the corpus beneficiaries as are living in the Trust Accounting Year (effectively, the financial year) and in such proportions and to one or more of them to the exclusion of others as the Trustee determines in its absolute discretion on or before the last day of the Trust Accounting Year. In default of determination, the income is to be divided equally between the first corpus beneficiaries as shall be living on the last day of the Trust Accounting Year, unless they have died and then it will be held for their surviving children (and the clause makes further provision in the event the children have died, for other corpus beneficiaries or their living children). 12. Subject to clause XX, in the management and investment of the Trust Fund, the Trustees have such powers as they would have if the same belonged to them beneficially other than powers of appointment for their own use or benefit or the use or benefit of the Settlor. 13. Without limiting the generality of clause XXX, the Trustees have the powers listed in the clause including to invest in real property. 14. The Trustee has the power to make a distribution of capital by payment or transfer of assets for the maintenance, education, advancement or benefit of any beneficiary who may be entitled to capital of the Trust on the distribution date. 15. Individual A and Individual E (Individual A's parent) have the power to appoint and remove trustees (Appointors). 16. The Trustee has the power under the Deed, with the consent of the Appointors, to alter, revoke or add to any of the provisions in the Deed and make new provisions to the exclusion of or in addition to any provisions for the time being in force and any such alteration, revocation or addition shall be subject in like manner to be altered, revoked or added to by a subsequent deed provided that no such alteration, revocation or addition would result in the assets comprising the trust fund or the income thereof being payable to the Settlor or Trustee and the distribution date cannot be extended. 17. The distribution date means the date 21 years after the death of the last surviving descendant of King George VI living at the date of the Deed or 21 years from the death of the last survivor of the first and second corpus beneficiaries living at the date of the Deed, whichever is the latter, or 1 January 2040, but can be brought forward by the Trustee. 18. The Trustee has the power, with the consent of the Appointors, to pay or apply the whole or part of the capital of the Trust to: • any other trust under which the capital or any part thereof is held for the benefit of all or any one of the persons referred to as a beneficiary under the Deed at the time of the payment or application other than a trust under which the trustees are beneficiaries; • any company or companies in which shares are held by or for the benefit of any of the persons referred to as beneficiaries under the Deed at the time such payment or application is made other than a company to which any shares are held by or for the benefit of the trustee. 19. Certain discretions conferred on the Trustee in the Deed are only capable of exercise with the consent of the Appointors. 20. The Deed has not been amended or varied since it was settled. 21. No new beneficiaries have been introduced to the Trust since the Deed was settled. 22. The Trustee has not made any capital distributions to any other trust or any company since settlement, under clause XXXX of the Deed. Distributions made by the Trustee of the Trust 23. Individual A has undertaken an extensive search of historical records. Noting this exercise, to the best of their knowledge, during the first 21 years of the Trust, to the extent that there was distributable income, the trustee distributed that income to a corpus beneficiary, such as Individual A and members of their immediate family (i.e., their spouse and child). In addition: • the trustee did not accumulate any income; and • the trustee did not apply any capital of the trust to a corpus beneficiary. 24. The Applicant provided the Trust's distributable income and distributions made during the period after the first full 21 years of the Trust. To the extent that there was distributable income, the Trustee distributed that income to Individual A and their spouse and child. 25. The Trustee has not conferred a present entitlement, nor distributed, any income or capital of the Trust to any individual or entity who was not a corpus beneficiary as originally defined in the Deed The Relevant Assets 26. The Trustee owns several residential properties. To the extent that the properties were acquired before 20 September 1985, they are the Relevant Assets to which this Ruling applies. 27. The predominant use of the Relevant Assets has been rental. 28. From the time of acquisition of the Relevant Assets to the date of application for this Ruling, various repairs and maintenance have been undertaken on the properties. Proposed Sales 29. The Trustee is planning to sell the Relevant Assets within the next two years. Further issues to consider There may be related issues that should be considered, including: • If any capital improvements have been made to any of the Relevant Assets to which subsection 108-70(2) or (3) of the ITAA 1997 has application.


Reasons for decision: Summary: Yes, the Commissioner is satisfied, or thinks it reasonable to assume, that at all times on or after 20 September 1985 and up to the time of issue of this Ruling, that majority underlying interests in the Relevant Assets were had by natural persons/ultimate owners as the case may be who had majority underlying interests in the Relevant Assets immediately before 20 September 1985. | Detailed Reasoning - Detailed reasoning: 1. Before being re-written into Division 149 of the ITAA 1997, former section 160ZZS of the ITAA 1936, which applied before the commencement of the 1999 income year, contained rules which governed when an asset acquired before 20 September 1985 would be deemed to have been acquired after that date. 2. Subsection 160ZZS(1) of the ITAA 1936 provided: For the purposes of the application of this Part in relation to a taxpayer, an asset acquired by the taxpayer on or before 19 September 1985 shall be deemed to have been acquired by the taxpayer after that date unless the Commissioner is satisfied, or considers it reasonable to assume, that, at all times after that date when the asset was held by the taxpayer, majority underlying interests in the asset were held by natural persons who, immediately before 20 September 1985, held majority underlying interests in the asset. 3. Division 149 contains the rules which govern when an asset acquired before 20 September 1985 stops being a 'pre-CGT asset' that are applicable to the 1999 and later income years. 4. Section 149-10 of the ITAA 1997 provides: A CGT asset that an entity owns is a pre-CGT asset if, and only if: (a) the entity last acquired the asset before 20 September 1985; and (b) the entity was not, immediately before the start of the 1998-99 income year, taken under: (i) former subsection 160ZZS(1) of the Income Tax Assessment Act 1936 ; or (ii) Subdivision C of Division 20 of former Part IIIA of that Act; to have acquired the asset on or after 20 September 1985; and (c) the asset has not stopped being a pre-CGT asset of the entity because of this Division. 5. In relation to paragraph 149-10(c) of the ITAA 1997, subsection 149-30(1) and (2) provides: (1) The asset stops being a *pre-CGT asset at the earliest time when *majority underlying interests in the asset were not had by *ultimate owners who had *majority underlying interests in the asset immediately before 20 September 1985. (1A) Also, Part 3-1 and this Part (except this Division) apply to the asset as if the entity had acquired it at that earliest time. (2) If the Commissioner is satisfied, or thinks it reasonable to assume, that at all times on and after 20 September 1985 and before a particular time *majority underlying interests in the asset were had by *ultimate owners who had *majority underlying interests in the asset immediately before that day, subsections (1) and (1A) apply as if that were in fact the case. 6. 'Majority underlying interests' in a CGT asset is defined in subsection 149-15(1) of the ITAA 1997, to consist of: (a) more than 50% of the beneficial interests that *ultimate owners have (whether directly or *indirectly) in the asset; and (b) more than 50% of the beneficial interests that ultimate owners have (whether directly or indirectly) in any *ordinary income that may be *derived from the asset. 7. An 'underlying interest' in a CGT asset is defined in subsection 149-15(2) of the ITAA 1997 as a beneficial interest that an ultimate owner has (whether directly or indirectly) in the asset or in any ordinary income that may be derived from the asset. 8. An 'ultimate owner' is relevantly defined in subsection 149-15(3) of the ITAA 1997 to include an individual or a company whose constitution prevents it from making any distribution, whether in money, property or otherwise, to its members. 9. Subsection 149-15(4) of the ITAA 1997 states: An ultimate owner indirectly has a beneficial interest in a CGT asset of another entity (that is not an ultimate owner) if he, she or it would receive for his, her or its own benefit any of the capital of the other entity if: (a) the other entity were to distribute any of its capital; and (b) the capital were then successively distributed by each entity interposed between the other entity and the ultimate owner. 10. Subsection 149-15(5) states: An ultimate owner indirectly has a beneficial interest in ordinary income that may be derived from a CGT asset of another entity (that is not an ultimate owner) if he, she or it would receive for his, her or its own benefit any of a dividend or income if: (a) the other entity were to pay that dividend or otherwise distribute that income; and (b) the dividend or income were then successively paid or distributed by each entity interposed between the other entity and the ultimate owner. 11. The Commissioner's view is that beneficiaries of a family discretionary trust can collectively have the "beneficial interests" and therefore "majority underlying interests" and continuity thereof for the purposes of Division 149 of the ITAA 1997 and former section 160ZZS of the ITAA 1936, where the discretionary trust continues to be administered only for the benefit of those original pre-CGT family member beneficiaries (including those forecast by the deed to become beneficiaries as a result of birth, adoption or marriage) throughout the test period (from immediately before 20 September 1985 to the time being tested): Taxation Ruling IT 2340 Income tax: capital gains: deemed acquisition of assets by a taxpayer after 19 September 1985 where a change occurs in the underlying ownership of assets acquired by the taxpayer on or before that date . Application to your circumstances 12. The original class of beneficiaries of the Trust consists of individuals that are relatives of the primary beneficiary, Individual A. 13. The Deed has not been amended or varied since the Trust was settled. There have been no changes to the classes of beneficiaries under the Trust. No new beneficiaries have been introduced to the Trust. The Trustee has not made any capital distributions to any trust or any company since settlement under clause XXXX of the Deed. The distribution history supports the conclusion that there have been no changes to the pre-CGT family member beneficiaries of the Trust on or after 20 September 1985. 14. In these circumstances, the Commissioner is satisfied that the Trust has continued to be administered for the benefit of the original pre-CGT family member beneficiaries. 15. Therefore, the Commissioner is satisfied that the collective majority underlying ownership interests in the Relevant Assets have been had up to the time of this Ruling by those ultimate owners who collectively had majority underlying interests in the Relevant Assets immediately before 20 September 1985.

Question 1: Is the Commissioner satisfied, or thinks it reasonable to assume, that at all times on or after 20 September 1985 and up to the time of issue of this Ruling, that majority underlying interests in the Relevant Assets were had by natural persons/ultimate owners as the case may be who had majority underlying interests in the Relevant Assets immediately before 20 September 1985 under section 160ZZS of the Income Tax Assessment Act 1936 and section 149-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?