Private ruling: Capital gains tax – deceased estate
Date of advice: 7 March 2019
Published: June 2019
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 July 2016

Ruling: Q1: Does the estate of the deceased have an ownership interest in relation to the property for capital gains tax purposes? | A1: No. 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, not the deceased’s estate.

Relevant facts and circumstances: The deceased used the property as the main residence from the time of acquisition until passing in 201X – a period in excess of 50 years. From the date of the deceased’s death, the property was occupied by one of the deceased’s children (the first child). In the Will, the deceased left their share in the property to the first child. The remaining share of the property had been held on trust by the deceased the deceased’s children until the deceased’s death. This remaining share passed to the deceased’s children pursuant to the intestacy provisions at section 50 of the state Wills, Probate and Administration Act 1898 upon the death of the deceased’s spouse in the 1950s. One of these children attained their majority several years prior to 20 September 1985. Probate for the deceased’s estate was granted in September 201X to the second child of the deceased. Another child of the deceased (the third child) filed a Summons in which was sought a family provision order out of the deceased’s estate and/or notional estate pursuant that state’s Succession Act 2006 . The second child was the named Plaintiff in proceedings in which the second child also sought a possession order for the property. These matters were heard concurrently in that state’s Supreme Court in 201X. In 201X, the Court issued its decision and orders. These order included: ● Orders that judgment be entered for the Plaintiff (the second child) for possession of the property ● Orders that the Defendant (the first child) vacate possession of the property In 201X, the second child contracted to sell the property to third party purchasers, with settlement taking place approximately five weeks later.

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)