Taxation Determination

TD 94/79

Income tax: capital gains: if a post-CGT asset bequeathed to a legal personal representative/beneficiary (LPR/B) is disposed of within 12 months of the LPR/B's acquisition, in which circumstances is indexation available?

  • Please note that the PDF version is the authorised version of this ruling.
    This ruling contains references to repealed provisions, some of which may have been rewritten. The ruling still has effect. Paragraph 32 in TR 2006/10 provides further guidance on the status and binding effect of public rulings where the law has been repealed or repealed and rewritten. The legislative references at the end of the ruling indicate the repealed provisions and, where applicable, the rewritten provisions.
    This document has changed over time. View its history.

FOI status:

may be releasedFOI number: I 1217830

This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953 , is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).

Disposal after more than 12 months from deceased's acquisition

1. If the LPR/B disposes of the asset within 12 months of the LPR/B's acquisition but after more than 12 months from when the deceased acquired the asset, the benefits of indexation are available to the LPR/B.

2. In these circumstances, the deemed consideration on acquisition by the LPR/B equals the amount that would have been the indexed cost base to the deceased at the date of death (subparagraph 160X(5)(b)(i) of the Income Tax Assessment Act 1936 ).

3. On a later disposal of the asset by the LPR/B, the LPR/B can, by virtue of subsection 160Z(4), index his/her cost base (i.e. the deemed consideration on acquisition). Subsection 160Z(4) alters, in effect, the subsection 160Z(3) reference date, for the purposes of determining whether or not to use the cost base or indexed cost base, to the time the asset was acquired by the deceased .

4. The combined effect of subparagraph 160X(5)(b)(i) and subsection 160Z(4) is that the LPR/B can receive the benefits of indexation from the time of the original acquisition of the asset by the deceased.

Disposal within 12 months of deceased's acquisition

5. If the LPR/B disposes of the asset within 12 months of the LPR/B's acquisition and within 12 months of the deceased's acquisition, the LPR/B is denied any benefits of indexation.

6. In these circumstances, the deemed consideration on acquisition by the LPR/B equals the amount that would have been the cost base to the deceased at the date of death (subsection 160X(6)).

7. On a later disposal of the asset by the LPR/B, the LPR/B cannot index his/her cost base (i.e. the deemed consideration on acquisition) because, for the purposes of subsection 160Z(3) as altered by subsection 160Z(4), the disposal occurs within 12 months of the deceased's acquisition.

Example 1

1 February 91 31 August 91 30 March 92
------------------- ---------------------- ----------------------
Asset acquired by A for $1,000,000 A dies and bequeaths asset to LPR/B Asset disposed of by LPR/B for $2,000,000
As disposal by the LPR/B occurs more than 12 months after the time of the original acquisition by the deceased, the LPR/B effectively receives the benefit of indexation from the date the asset was originally acquired by the deceased. Therefore, both the deemed consideration on acquisition and the cost base on disposal is indexed. Accordingly, the capital gain resulting from this example is as follows:Asset acquired by LPR/B on 31 August 1991 (paragraph 160 X(5)(b))
Deemed consideration on acquisition by LPR/B:(using the 'new series' of index numbers),

$1,000,000 * 1.008[i.e.106.6/105.8]

= $1,008,000

Indexed cost base on disposal by LPR/B

$1,008,000 * 1.009 [i.e.107.6/106.6.]

= $1,017,072

Consideration on disposal $2,000,000
Indexed cost base $1,017,072
Capital Gain $ 982,928
Note: If the 'old series' of indexed numbers is used, the deemed consideration on acquisition by the LPR/B is $1,000,000 x 1.007 [i.e. 215.7/214.1] = $1,007,000. The indexed cost base on disposal by the LPR/B is $1,007,000 x 1.009 [i.e. 217.7/215.7] = $1,016,063. The capital gain is $983,937.

Example 2

1 February 91 31 August 91 30 January 92
------------------- ---------------------- ----------------------
Asset acquired by A for $1,000,000 A dies and bequeaths asset to LPR/B Asset disposed of by LPR/B for $2,000,000
On disposal of the asset on 30 January 92, the LPR/B does not receive any benefit of indexation in determining the deemed consideration on acquisition and the cost base on disposal. This is because the time of disposal by the LPR/B occurs within 12 months of the time of the original acquisition by the deceased. Consequently, the LPR/B is assessable on the capital gain of $1,000,000.

Commissioner of Taxation
15/9/94

Previously issued as Draft TD 93/D289

References

ATO references:
NO MPS 2001/1 (CGTDET79)

ISSN 1038 - 8982

Related Rulings/Determinations:

TD 94/75

Subject References:
beneficiary;
capital gain;
consideration;
cost base;
death;
indexed cost base

Legislative References:
ITAA 160X(5)(b);
ITAA 160X(5)(b)(i);
ITAA 160X(6);
ITAA 160Z;
ITAA 160Z(3);
ITAA 160Z(4)

TD 94/79 history
  Date: Version: Change:
  15 September 1994 Original ruling  
You are here 29 November 2006 Original ruling + note Repeal provision note