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Edited version of private ruling

Authorisation Number: 1011829898201

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Ruling

Subject: Capital gains tax - deceased estate

Question and Answer

Upon your death will a capital gains tax (CGT) event occur and cause a capital gain or capital loss to be crystallised in relation to your Australian real estate assets?

No

This ruling applies for the following periods:

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commences on:

1 July 2011

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are not a resident of Australia for tax purposes. You do not envisage becoming a resident.

You acquired a half interest in a property at # X ABC Drive, XYZ Suburb in 19XX.

You acquired a half interest in a freehold commercial premises situated in QRS Street, XYZ Suburb on the X December 19XX.

You have drawn up a Will in order to deal with your Australian assets.

The Will creates a trust benefit for your spouse and your children.

Your spouse and one of your children are non-residents of Australia for tax purposes.

The trustee is a resident trustee.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-215.
Income Tax Assessment Act 1997 Subsection 104-215(1).
Income Tax Assessment Act 1997 Subsection 104-215(2).
Income Tax Assessment Act 1997 Section 128-10.
Income Tax Assessment Act 1997 Section 855-15.
Income Tax Assessment Act 1997 Section 855-20.
Income Tax Assessment Act 1997 Section 995-1.

Reasons for decision

Section 128-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that when a person dies, a capital gain or capital loss from a capital gains tax (CGT) event happening to a CGT asset the person owned just before dying is disregarded. However, section 104-215 of the ITAA 1997 (CGT event K3) sets out an exception to this rule if the CGT asset passes to a beneficiary in your estate who is:

Subsection 104-215(2) of the ITAA 1997 states that if the asset passes to a beneficiary who is a foreign resident, CGT event K3 happens only if:

Taxable Australian property includes taxable Australian real property which is defined in section 855-20 of the ITAA 1997 and includes real property situated in Australia.

In your case, you will not be an Australian resident just before dying and the property is taxable Australian property; therefore CGT event K3 will not happen. Accordingly, no capital gain or capital loss will be crystallised in relation to your Australian real estate and would not be included in your final return.

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