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Edited version of your written advice
Authorisation Number: 1051244333676
Date of advice: 5 August 2017
Ruling
Subject: Capital gains tax - deceased estate - discount capital gain
Question:
Is the trustee entitled to apply the 50% capital gains tax (CGT) discount to the capital gains arising from the sale of the investment properties?
Answer:
Yes.
This ruling applies for the following periods:
Year ending 30 June 201D
The scheme commenced on:
1 July 201C
Relevant facts
You are the trustee for a deceased estate (The deceased)
The deceased passed away in 201B.
The deceased’s assets consist of a number of properties acquired pre and post CGT.
The deceased’s spouse passed away in 201A and the deceased inherited their share in the properties in survivorship.
You have transferred to a beneficiary title to 1 of the properties.
The deceased has owned this property for more than 12 months.
You will dispose of a number of properties in 201C (but more than 12 months after the deceased passed away).
The deceased was not in the business of property development.
The trustee will not subdivide the properties prior to sale.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subdivision 115-A
Reasons for decision
Under section 115-5 of the Income Tax Assessment Act 1997 you make a discount capital gain if the following requirements are satisfied:
● you are an individual, a trust or a complying superannuation entity
● a capital gains tax (CGT) event happens to an asset you own
● the CGT event happened after 11.45am (by legal time in the ACT) on 21 September 1999
● you acquired the asset at least 12 months before the CGT event, and
● you did not choose to use the indexation method.
Under the discount method you reduce your capital gain by the discount percentage. For individuals, the discount percentage is 50%. However, you can reduce the capital gain only after you have applied all the capital losses for the year and any unapplied net capital losses from earlier years.
The discount capital gain is included in your assessable income and taxed at the marginal rate applicable to that income for that year.
In your case, you, as trustee of a deceased estate, will dispose of investment properties which the deceased owned for more than 12 months. You will also dispose of properties that you as trustee have held for 12 months. As the properties will be sold (the CGT event) after 21 September 1999 you are able to discount the capital gain made by 50%.
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