In the 2011-12 Federal Budget, the government announced an intention to legislate the current ATO practice of allowing a testamentary trust to distribute an asset of the deceased person without a capital gains tax (CGT) taxing point occurring. The income tax law for deceased estates will also be rewritten using a principle-based format and minor technical issues for deceased estates will be fixed.
On 8 May 2012, as part of the 2012-13 Federal Budget, the government announced it will make a series of minor amendments to the 2011-12 Budget measure to ensure the proper functioning of the CGT provisions for deceased estates. These changes include:
- reducing compliance costs by ensuring the deceased's tax return does not need to be amended as the taxing point will be recognised by the entity transferring the asset
- modifying application dates for minor changes announced in the 2011-12 Federal Budget
- broadening the scope of the integrity provisions to also apply to assets passing via survivorship.
These changes are proposed to apply to CGT events happening on or after the day the legislation received royal assent, except for the roll-over that will apply where an intended beneficiary dies before administration is completed. This change will be backdated to apply to CGT events that happen in the 2006-07 and later income years.
The ATO will accept tax returns as lodged during the period up until the proposed law change is passed by parliament. Past year assessments will not be reviewed until the outcome of the proposed amendment is known.
After the new law is enacted, impacted taxpayers will need to review their positions back to the 2006/07 income year:
- taxpayers who chose roll-over relief which accords with the changes do not need to do anything more
- taxpayers who did not choose roll-over relief can seek amendments and if a reduction in liability results, interest on overpayment will be paid
- taxpayers who chose to anticipate the roll-over relief, but find that this does not accord with the changes will need to seek amendments.
In these cases no tax shortfall penalties will be applied and any interest accrued will be remitted to the base interest rate up to the date of enactment of the law change. In addition, any interest in excess of the base rate accruing after the date of enactment will be remitted where taxpayers actively seek to amend assessments within a reasonable timeframe after enactment.
For more information about these measures, refer to:
Last Modified: Monday, 9 July 2012