Private ruling: Capital gains tax - deceased estate - absolutely entitled beneficiary
Date of advice: 22 March 2019
Published: May 2019
Ruling period: Year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Does the estate have an ownership interest in relation to the property (the property) for capital gains tax purposes? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 section 106-50 | Income Tax Assessment Act 1997 subsection 100-25(1) | Income Tax Assessment Act 1997 subsection 118-130(3) | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 128-20(1)

Reasons for decision: Summary: A CGT asset owned by a deceased person at the time of their death passes to a beneficiary of the deceased’s estate if the beneficiary becomes the owner of the asset under the will or in one of the other ways set out in subsection 128-20(1) of the Income Tax Assessment Act 1997 (ITAA 1997). An asset will ‘pass’ to the beneficiary of a deceased estate when the beneficiary becomes absolutely entitled to the asset as against the estate’s trustee. A beneficiary becomes absolutely entitled to an asset under a will once the administration of the estate is complete, that is, when the assets of the estate have been called in and the deceased’s debts and liabilities have been paid. Therefore, in a subsequent sale of the property, any CGT issues that may arise are a matter for the beneficiary or estate of the beneficiary and not the deceased’s estate.

Relevant facts: The deceased used the property as their main residence from the time of acquisition until their passing. | From the date of the deceased’s death, the property was occupied by their child, (‘A’) up to their death. | In their Will, the deceased left the property to ‘A’. | ‘A’ is the sole beneficiary of the deceased. | ‘A’ was declared bankrupt and was not discharged from bankruptcy for a number of years. | The property also had a caveat lodged on the title relating to a loan agreement entered into by ‘A’. | The executor named in the will of the deceased did not apply for a grant of probate and gave authority for ‘X’ to apply for probate in 2017. | Probate was granted in 2017. | The caveat was removed and the property was prepared for sale. | Title to the property remained in the name of the deceased. | The property was sold in 2018 and settlement occurred in 2018.