Private ruling: CGT - deceased estates - streaming
Date of advice: 9 February 2024
Published: 2 April 2024
Ruling period: Year ended 30 June 20XX
Date scheme commenced: XX September 20XX

Ruling: Q1: Does section 115-222 of the Income Tax Assessment Act 1997 increase the amount in respect of which you are liable to be assessed (and pay tax) under either section 99 or 99A of the Income Tax Assessment Act 1936 by any portion of the net capital gain? | A1: No. There is no portion of the net capital gain that is assessable to you under section 115-222 of the ITAA 1997 because the whole of the net capital gain has been streamed to an income tax exempt organisation (the Organisation). The Commissioner accepts that the streaming of the net capital gain to the Organisation is effective.

Relevant facts and circumstances: On XX MM 20XX the Deceased died. The Deceased's last Will is dated XX MM 20XX (the Will). On XX MM 20XX probate of the Will was granted by the Supreme Court to the Deceased's child (Child A). Pursuant to the terms of the deceased's last Will, the Deceased, inter alia: a) appointed Child A as their executor; b) gave specific bequests in the amount of $XX to each of: (i) his spouse; (ii) Child A; (iii) Child B; and (iv) Two adult grandchildren, namely Grandchild A and Grandchild B (collectively referred to as the grandchildren beneficiaries) c) Left the residue of his estate to the Organisation to be used for its general purposes. The Organisation is an income tax exempt, deductible gift recipient. Clause 4 of the Will also allows the Executor a power to sell estate assets. The Deceased's Estate was subject to three separate claims pursuant to Part IV of the Administration and Probate Act 1958 for further provisions. The claims were brought by Child A in their capacity as beneficiary, Child B and the Deceased's spouse. In MM 20XX the claims were settled at mediation and a Deed of Settlement was executed on XX MM 20XX. At the mediation date, the parties agreed that the Deceased's Estate was worth approximately $XX. The Deed of Settlement broadly distributed the residuary (subject to adjustments) as follows: a) 25% to Child A b) 25% to Child B c) 20% to the Deceased's spouse d) 30% to the Organisation. The Deed of Settlement further stated at Clause 7 that Child A was to take all reasonable steps to sell all shareholding and managed funds (the Investments) within three months of the date of the Deed of Settlement, and at the latest by 30 June 20XX. Clause 7 specifically states: Child A, in his representative capacity, and the parties in their personal capacities agree that Child A will administer the estate to effect the distribution referred to in paragraph 6 as follows:- I. Engage XX Lawyers to complete the administration of the estate (the reasonable costs of which shall be borne by the estate); II. Appoint XX as the estate's accountants; Ill. Take all reasonable steps to sell all shareholdings and managed funds ("the Investments") within three months of the date of this Deed of Settlement, and at the very latest sell the Investments within the financial year ending 30 June 20XX including (and, if further managed funds are ascertained, not limited to):- List of investments deleted. IV. Obtain from the accountant, all relevant taxation advice for the estate and take all reasonable steps to complete all actions advised by the accountant (the cost of which shall be borne by the estate) including but not limited to: i. Obtaining a private ruling from the Australian Taxation Office if the accountant advises that such a ruling is necessary and/or appropriate; ii. Preparing and signing all necessary documents including minutes and tax returns by the relevant due dates; iii. Streaming and/or allocating the amount of Capital Gains associated with the sale of the Investments to the Organisation and in accordance with taxation advice, the balance of Capital Gains not able to be allocated and/or streamed to XX to be allocated and/or streamed to Deceased's spouse, Child A and Child B in the proportions set out in paragraph 6 above and those beneficiaries will personally bear the tax consequences (including CGT payable) of such allocations and/or streaming; with the aim of maximising the estate for all parties; iv. Subject to the advice of the accountant, ensuring that the estate pays all tax on the income and claims all associated franking credits of the deceased and the estate for the year ending 30 June 2022; v. Subject to the advice of the accountant, streaming and/or allocating the income and any associated franking credits of the estate for the financial year ending 30 June 20XX to the Organisation, the Deceased's spouse, Child A and Child B in accordance with the proportions set out in paragraph 6 above; vi. Completing all other actions pursuant to the advice of the accountant to maximise the estate for all parties and beneficiaries. By the end of March 20XX, all investments had been sold, realising proceeds of $XX and an estimated net capital gain of $XX after application of losses. On the XX MM 20XX a Resolution of the Executor for the Estate (the Resolution) was signed. Several statements were included within The Resolution included the following: I note that: • Under Clause 5 of the Will, the residual of the estate was to pass to the Organisation which was subject to Part IV claims. • The claims were settled at mediation and a Deed of Settlement signed on XX December 20XX. • Clause 6 (VIII) of the Deed of Settlement identified the residual beneficiaries of the estate. • Clause 4 of the Will provides the executor the powers to sell the assets of the estate on such terms as they think fit. • The executors also have the power in Clause 7 to "appropriate any part" of the estate in satisfaction of their entitlements. I hereby resolve to stream the capital gains resulting from the sale of the shares & managed funds to the Organisation. The capital gains streamed do not exceed the Organisation's share of the residue of the estate. I confirm I do not require the funds attributable to those gains for the purposes of the estate administration and hereby resolve to pay the net financial benefit attributable to the gains (before the application of the CGT discount) to the Organisation. The entitlement to the Organisation under the Deed of Settlement is in excess of $XX being in excess of the net financial benefit from the sale of the Investments. The Deceased Estate was not fully administered by 30 June 20XX. The Executor intends to make the final distributions and wind up the Estate at the earliest opportunity.

Relevant legislative provisions: Income Tax Assessment Act 1936 Division 6 of Part III | Income Tax Assessment Act 1936 Division 6E of Part III | Income Tax Assessment Act 1997 Part 3-1 | Income Tax Assessment Act 1997 Subdivision 115-C | Income Tax Assessment Act 1936 section 97 | Income Tax Assessment Act 1936 section 100AA | Income Tax Assessment Act 1936 section 100AB | Income Tax Assessment Act 1997 section 115-222 | Income Tax Assessment Act 1997 section 115-227 | Income Tax Assessment Act 1997 section 115-228