1051841265399 | Legal database

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Edited version of private advice

Authorisation Number: 1051841265399

Date of advice: 19 May 2021

Ruling

Subject: CGT - deceased estate

Question

Will section 128-15 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to disregard any captain gain or loss when the properties are transferred to the beneficiaries of the trust?

Answer

Yes

This ruling applies for the following periods:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The trust came into being following the death of the deceased on the granting of Probate.

The Trustee is a family member of the deceased.

The beneficiaries of the trust include the family members of the deceased.

The trust owns multiple properties.

The trust will distribute one or more of the properties to one or more of the beneficiaries.

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 128-15

Income Tax Assessment Act 1997 section 128-20

Reasons for decision

You may make a capital gain or a capital loss when a capital gains tax (CGT) event happens to a CGT asset. The most common CGT event is CGT event A1 which occurs when the ownership in a CGT asset is transferred to another entity.

Section 128-15 of the ITAA 1997 sets out what happens to a CGT asset that a deceased taxpayer owned just before their death that devolves to their legal personal representative or passes to a beneficiary in their estate.

Subsection 128-15(3) of the ITAA 1997 states any capital gain or capital loss the legal personal representative makes if the asset passes to a beneficiary in your estate is disregarded.

A legal personal representative includes an executor or administrator of an estate of an individual who has died. The trustee of a testamentary trust is treated in the same manner as the trustee of a deceased estate or LPR for the purposes of applying Division 128 of the ITAA 1997 (PS LA 2003/12).

The table in subsection 128-15(4) of the ITAA 1997 sets out the modifications to the cost base and reduced cost based of the CGT asset in the hands of the legal personal representative or beneficiary.

Modifications to cost base and reduced cost base
Item	For this kind of CGT asset:	The first element of the asset's cost base is:	The first element of the asset's reduced cost base is:
1	One you *acquired on or after 20 September 1985, except one covered by item 2, 3, 3A or 3B	the *cost base of the asset on the day you died	the *reduced cost base of the asset on the day you died
..........
2	One that was *trading stock in your hands just before you died	the amount worked out under section 70-105	the amount worked out under section 70-105
..........
3	A dwelling that was your main residence just before you died if: (a) the dwelling was not then being used for the purpose of producing assessable income; and (b) you were not then an *excluded foreign resident	the market value of the dwelling on the day you died	the market value of the *dwelling on the day you died
..........
3A	If you were a foreign resident just before you died - an asset that was not *taxable Australian property just before you died, except one covered by item 2	the *market value of the asset on the day you died	the market value of the asset on the day you died
..........
3B	One that passes to a trustee of a special disability trust	the *market value of the asset on the day you died	the market value of the asset on the day you died
..........
4	One you *acquired before 20 September 1985	the *market value of the asset on the day you died	the market value of the asset on the day you died

Therefore section 128-15 of the ITAA 1997 applies to disregard any capital gain or loss made by the Trustee of the Trust when the properties pass to the beneficiaries.

As outlined in subsection 128-15(4) of the ITAA 1997, where the property was the deceased's main residence just before their death or acquired before 20 September 1985, when it is transferred to the beneficiary they will have a cost base of market value on the day the deceased died. Where the property was acquired after 20 September 1985 and was not the deceased's main residence, the beneficiary's cost base will be the deceased's cost base on the day they died.

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