Edited version of private advice

Authorisation Number: 1052115619357

Date of advice: 8 May 2023

Ruling

Subject: CGT - trust

Question 1

Is the Estate a foreign trust for the purposes of section 855-10 of the Income Tax Assessment Act 1997?

Answer

Yes, the Estate is a foreign trust under section 855-10 of the ITAA 1997 under both the Trustee Test and the Control Test.

Question 2

Will the Estate be able to disregard the capital gain arising from the realisation of the Estate Shares under section 855-10 of the ITAA 1997?

Answer

Yes, the Estate is able to disregard the capital gain arising from the realisation of the Estate Shares under section 855-10 of the ITAA 1997 as the Estate shares are a CGT asset that is not Taxable Australian Property and a CGT event will happen to the Estate Shares.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

A died on XXXX.

At the time of their death, A was an Australian resident for income tax purposes.

A's Will appointed their child B as the sole Executor of the Estate.

B is a foreign resident for income tax purposes.

B's main residence is overseas.

B does not have an Australian bank account and has never prepared an Australian tax return.

Probate was granted to B on XXXX.

B administers the Estate from overseas.

B authorises all decisions concerning the Estate.

Any Australian lawyers or accountants engaged by B in the course of the administration of the Estate act solely on B's instructions.

The beneficiaries of A's Will are:

•         B

•         C, A's sibling

•         D, A's grandchild; and

•         E, A's granchild.

None of the beneficiaries under A's Will are Australian residents for income tax purposes.

The Will specifies the division of specific gifts of A's main residence and foreign coins to B.

The balance of A's assets form the residuary estate to be distributed as follows:

•         80% to D and E as tenants in common in equal shares; and

•         20% to C.

The residuary estate is comprised predominantly of share portfolios in various companies listed on the Australian Stock Exchange and foreign stock exchanges ("Estate Shares").

The Estate Shares have been determined by a stockbroker as follows:

•         Australian shareholdings - approximately $XXX; and

•         Overseas shareholdings - approximately $XXX.

The Estate does not hold more than 10% of the issued shares in any company (whether incorporated in Australia or otherwise).

It is proposed the Estate Shares will be sold such that the sale proceeds can be distributed to C, D and E.

The Estate Shares will crystallise a capital gain on their disposal.

Relevant legislative provisions

Income Tax Assessment Act 1936 Division 6(1)b)

income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 108-5

Income Tax Assessment Act 1997 section 115-215(3)

income Tax Assessment Act 1997 section 855-10

Income Tax Assessment Act 1997 section 855-10(1)

Income Tax Assessment Act 1997 section 855-15

Income Tax Assessment Act 1997 section 855-25(1)

Income Tax Assessment Act 1997 section 955-1

Income Tax Assessment Act 1997 section 960-195

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