Private ruling: Deceased estate
Date of advice: 4 July 2025
Published: 1 September 2025
Ruling period: Income Tax Year ended XX XX 20XX
Date scheme commenced: XX XX 20XX

Ruling: Q1: Upon completion of the administration of the Estate for the year ended 30 June 20XX, will the beneficiary of the Estate have fixed entitlements to the income and capital of the trust for the purposes of section 272-5 in Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) such that the trust is a fixed trust for the purpose of section 272-65 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. | Q2: Will section 855-40 of the ITAA 1997 apply to disregard the beneficiary of the Estate's share of the capital gains that arose when the Legal Personal Representative (LPR) disposed of assets that were not taxable Australian property of the Deceased? | A2: Yes.

Relevant facts and circumstances: The deceased died in XX 20XX. Letters of administration were granted to the executor in XX 20XX (the estate). The sole surviving beneficiary of the estate was their family member (the beneficiary). The beneficiary was/is a long-term foreign tax resident. During the income tax year ended 30 June 20XX, the estate was under active administration and therefore income was assessed against the trustee. During the income tax year ended 30 June 20XX, the estate reached the final state of administration. The estate disposed of holdings in managed funds and direct listed entities that had been held by the deceased at their date of death and from this, made a large cash distribution to the beneficiary. The estate did not need the excess funds to complete the administration as the outstanding expenses and the quantum of the residual estate could be determined. The estate intended for the 20XX income tax return to be its final tax return.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 272-5 in Schedule 2F | Income Tax Assessment Act 1997 section 272-65 | Income Tax Assessment Act 1997 section 855-40

Reasons for decision: Summary: As the Will is unconditional, from the time the administration of the estate for the ended 30 June 20YY is complete, the beneficiary holds a fixed entitlement for the purpose of s 272-5 of the ITAA 1997 and the estate is regarded as a fixed trust under s 272-65 of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: The ATO Interpretative Decision ATO ID 2006/279 - Income tax: Trust losses - fixed entitlement - beneficiaries of a deceased estates provides the ATO's view that a deceased estate in which the beneficiaries have fixed entitlements to the income and capital of the estate can be regarded as a fixed trust. The beneficiary was the sole surviving beneficiary per the Will which "directed all assets of the estate" to the beneficiary. The Commissioner is satisfied that in your case, the beneficiary does have fixed entitlements to the income and capital of the estate. As the beneficiary has a fixed entitlement to all the income and capital, the Estate is a fixed trust under section 272-65 of Schedule 2F of the ITAA 1936. | Detailed Reasoning - Question 2: Will section 855-40 of the ITAA 1997 apply to disregard the beneficiary of the Estate's share of the capital gains that arose when the Legal Personal Representative (LPR) disposed of assets that were not taxable Australian property of the deceased? | Summary: Section 855-40 of the ITAA 1997 disregards a non-resident beneficiaries share of the non-Taxable Australian Property gains of a fixed trust. | Detailed Reasoning - Detailed reasoning: Section 855-40 of the ITAA 1997 provides a CGT exemption for foreign residents making a capital gain in respect of their interest in a fixed trust if certain conditions are met. We are satisfied that you meet those conditions. Therefore, the non-resident remainder beneficiary can disregard a capital gain that is not on taxable Australian real property.

Question 1: Upon completion of the administration of the estate of the Estate for the year ended 30 June 20XX, will the beneficiary of the Estate have fixed entitlements to the income and capital of the trust for the purposes of section 272-5 in Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936) such that the trust is a fixed trust for the purpose of section 272-65 of the Income Tax Assessment Act 1997 (ITAA 1997)?