| Disclaimer This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011549755363
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fac sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Capital gains tax - shares
Questions and answers:
1. Does a CGT event occur if shares held by the deceased at the time of their death are transferred to a non-resident beneficiary?
Yes
2. Is any capital gain or capital loss made on the transfer of the shares to the non-resident beneficiary included in the date of death return?
Yes
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commences on:
1 July 2009
Relevant facts and circumstances
The deceased died after 12 December 2006.
The deceased was a resident of Australia.
The deceased left assets to a non-resident beneficiary.
The assets consisted of cash and Australian publicly listed shares.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-20.
Income Tax Assessment Act 1997 Section 104-10.
Income Tax Assessment Act 1997 Section 104-215.
Income Tax Assessment Act 1997 Subsection 104-215(3).
Income Tax Assessment Act 1997 Section 855-15.
Income Tax Assessment Act 1997 Section 855-20.
Reasons for Decision
You make a capital gain or a capital loss if and only if a capital gains tax (CGT) event happens to a CGT asset (section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997)).
Generally, where a change of ownership occurs because a person dies, and an asset passes from their legal personal representative to a beneficiary, any capital gain or capital loss made on the change of ownership is disregarded.
However, where the deceased died after 12 December 2006, any capital gain or capital loss is not disregarded where the beneficiary of an asset, acquired by the deceased after 20 September 1985, is a non-resident of Australia for taxation purposes and the asset is not taxable Australian property (section 104-215 of the ITAA 1997).
Not taxable Australian property
There are five categories of assets that are taxable Australian property (section 855-15 of the ITAA 1997):
1. Taxable Australian real property (directly held)
2. Indirect Australian real property interests (other than category 5)
3. Business assets used in an Australian permanent establishment of a foreign resident
4. Options or rights over assets in categories 1-3
5. Assets where a CGT gain or loss is deferred when an entity ceases to be an Australian resident.
The shares inherited from the deceased by the non-resident do not meet any of the five above categories and therefore are not a 'taxable Australian property' asset.
CGT event K3
CGT event K3 happens if a CGT asset owned by a person who was an Australian resident for tax purposes just before they died, passes to a beneficiary in their estate who is, when the asset passes, a non resident of Australia for taxation purposes and the asset is not taxable Australian property (in the hands of the non-resident beneficiary) (section 104-215 of the ITAA 1997).
Under subsection 104-215(3) of the ITAA 1997, CGT event K3 is taken to happen just before the deceased's death. Where CGT event K3 happens, the trustee of the deceased estate will be required to calculate any capital gain or capital loss made on post CGT assets and include, in the date of death return, any net capital gain for the income year in which the deceased died.
A capital gain is made if the market value of the asset on the day the deceased died is more than the assets cost base. A capital loss is made if that market value is less than the assets reduced cost base.
In this case, the deceased died after 12 December 2006 and was a resident of Australia at the time of death. One of the beneficiaries was a non-resident at the time of death. The asset in question, shares, is not 'taxable Australian property' in the hands of the non-resident beneficiary. Accordingly CGT event K3 will be triggered.
With respect to the shares (post-CGT) acquired by the non-resident beneficiary, the time of the CGT event is just before the deceased died. Any capital gain or capital loss is taken into account in the date of death return.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
