Private ruling: Capital gains tax - deceased estate and deed of family arrangement
Published: July 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1:  | A1: Yes.

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. After 20 September 1985, your parents jointly purchased a property (the property). The property was primarily the family holiday house. Approximately ten years ago your parent A passed away. The following year the title of the property was transferred into your parent B's name. Approximately four years ago your parent B passed away. You are an executor (trustee) and a beneficiary of your parent B's will. Under your parent B's will all their assets were to be divided equally between their children - you and your siblings, person C and person D. Several years ago you and your siblings entered into a Deed of Family Arrangement (the deed). All the parties (the beneficiaries) to the deed agreed that the property was valued at a specified amount and to transfer the property to person D as an appropriation in part satisfaction of their entitlement under the terms of your parent B's will plus a payment of a specified amount to the estate. You and your sibling made a capital gain on the disposal of your interests in the property Over two years ago you received a specified amount from your parent B's estate for the disposal of your interest in the property in accordance with the deed. From advice received two years ago a specified amount should be withheld from each beneficiary from the distribution of the estate for the payment of capital gains tax (CGT), when person D disposes of the property in the future. A specified amount was distributed to person D as an allowance for a future CGT liability. A further allowance of a specified amount has been made to person D for lodgement fee on the application by your parent B's estate. A specified amount was withheld by the trustees for any expenses arising from the finalisation of your parent B's estate. Approximately two years ago you also received a cheque for a specified amount being the final distribution from your parent B's estate. The following month the title of the property was transferred into person D's name. Early last year person D disposed of the property. You have provided a copy of documentation to support your application and these documents are to be read with and forms part of your application for the purpose of this ruling.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Section 128-15 | Income Tax Assessment Act 1997 Section 128-20 | Income Tax Assessment Act 1997 Section 104-10

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. A CGT event occurs if you dispose of a CGT asset that you own. You are taken to have disposed of an asset if there is a change of ownership of the asset from you to another entity. The time of the event will normally occur at the time you enter into the contract for its disposal or if there is no contract when the change of ownership occurs. CGT event A1 occurred upon the transfer of the property. | Detailed Reasoning - Deceased estate: When a person dies a capital gain or capital loss from a CGT event happening to a CGT asset owned by the deceased just before death, is generally disregarded. If you acquire an asset owned by a deceased person as their trustee or it passes to you as a beneficiary you are taken to have acquired the asset on the day the person died. A CGT asset passes to a beneficiary in a deceased estate if the beneficiary becomes the owner of the asset and includes the following: · the asset passes under your will, or that will varied by a court order, or · under a deed of arrangement where: · the beneficiary entered into the deed to settle a claim to participate in the distribution of the estate, and · any consideration given by the beneficiary for the asset consists only of a variation or waiver of a claim to one or more other asset that formed part of the estate. In your case, the deed you and your sibling entered into did not vary or waiver any of the beneficiary's interests in the deceased's estate. The deed you and your siblings entered involved only one asset of the deceased's estate - the property. .As the only consideration your sibling gave was cash, the prpoerty does not pass. Therefore, a CGT event A1 occurred upon the transfer of the property, so the normal CGT rules apply. As you meet all the necessary criteria you can use the discount method to calculate your capital gain. The discount percentage is 50% for individuals.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Subject: Capital gains tax - deceased estate and deed of family arrangement: Question: Is the capital gain disregarded on the transfer of the deceased's property to your sibling?