• Exceptions to this special rule

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    A capital gain or capital loss is not disregarded if a post-CGT asset owned at the time of death:

    • passes from the deceased to a tax-advantaged entity or to a non-resident, or
    • is transferred from their legal personal representative to an entity that is not a beneficiary.

    Tax-advantaged entity

    A tax-advantaged entity is:

    • a tax-exempt entity (for example, a church or charity), or
    • the trustee of:
      • a complying superannuation fund
      • a complying approved deposit fund, or
      • a pooled superannuation trust.
       

    If an asset that is part of a deceased estate passes to a tax-advantaged entity, a CGT event is taken to have happened in relation to the asset just before the person died. If this happens, the CGT event will result in:

    • a capital gain if the market value of the asset on the day the person died is more than the cost base of the asset, or
    • a capital loss if the market value is less than the asset's reduced cost base.

    A 'date of death return' should be lodged (for the period from the start of the income year to the date of the person's death) showing any capital gain or capital loss. It is the trustee of the deceased estate, not the tax-advantaged beneficiary, who pays tax on any net capital gain.

    Non-resident beneficiary

    If a non-resident is a beneficiary of a deceased's post-CGT asset, any capital gain or capital loss is not disregarded if:

    • the deceased was an Australian resident when they died, and
    • the asset does not have the necessary connection with Australia.

    Examples of assets that have the necessary connection with Australia include:

    • real estate located in Australia, and
    • shares in an Australian resident private company.

    In this case, a CGT event happens in relation to the asset owned at the time of a person's death. If the market value of the asset on the date of death is:

    • more than the asset's cost base, a capital gain is made, or
    • less than the asset's reduced cost base, a capital loss is made.

    Any capital gain or capital loss is included in the date of death return. Again, it is the trustee of the deceased estate, not the non-resident beneficiary, who pays tax on any net capital gain.

    Last modified: 31 Aug 2010QC 16195