Edited version of private ruling

Authorisation Number: 1011765528760

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Ruling

Subject: Capital gains tax - Deceased estate - Passing assets to specified Fund

Question 1: Will CGT event K3 happen to the shares that pass to the Fund?

Answer: Yes.

Question 2: Will any capital gain or capital loss you make from CGT event K3 happening to the shares be disregarded?

Answer: Yes.

This ruling applies for the following period<s>:

2010-11 income year

2011-12 income year

2012-13 income year

2013-14 income year

The scheme commences on:

1 July 2010

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 an Australian resident.

You have a share portfolio which has significant unrealised capital gains.

You wish to maximise the value of the benefit that your estate can provide to your beneficiary (a gift deductible charity).

You have re-drafted your will in accordance with advice that you have received from a Trustee company in a letter.

Your new will provides for the disposal of the residue of your estate to a specified fund (the Fund).

The Fund is endorsed as a deductible gift recipient.

Your new will expresses the wish, but not obligation that your gift to the Fund be held as an Account within the trusts of the Fund and that the endowment be applied in perpetuity for the benefit of your beneficiary (a gift deductible charity).

The following documents are to be read with and form part of the description of the scheme for the purpose of this ruling:

· Your last will and testament

· Letter from the Trustee company

Assumptions

You will pass away during the period covered by this ruling.

At least some of the shares that you own when you pass away will pass to the Fund in accordance with your will.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 30-15,

Income Tax Assessment Act 1997 Section 102-20,

Income Tax Assessment Act 1997 Section 102-22,

Income Tax Assessment Act 1997 Section 102-23,

Income Tax Assessment Act 1997 Section 104-215,

Income Tax Assessment Act 1997 Section 118-60,

Income Tax Assessment Act 1997 Section 128-10 and

Income Tax Assessment Act 1997 Section 128-20.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Question 1

Summary

CGT event K3 will happen to the shares that pass to the Fund.

Detailed reasoning

The effect of death

Division 128 of the ITAA 1997 provides a series of roll-overs in respect of assets that a person owns when they pass away.

The effect of the roll-overs is to transfer the deceased person's unrealised capital gains and capital losses in respect of these assets (if any) to their legal personal representative and then onto the beneficiaries who receive the assets from the estate. The legal personal representative or beneficiary may then be liable for that tax when a later CGT event happens to the asset.

However, some beneficiaries are not subject to income tax (including capital gains tax) in Australia (for example, exempt entities).

Where the roll-over due to a person passing away would transfer the unrealised capital gain or capital loss on an asset to someone who is exempt from income tax, the roll-over is withdrawn and CGT event K3 happens instead.

The deceased person makes the capital gain or capital loss under CGT event K3 just before they pass away. This CGT event still happens even if any capital gain or capital loss you make from the event is disregarded.

Application to your situation

At least some of the shares that you own when you pass away will pass to the Fund in accordance with your will and the Fund is a tax exempt entity.

The passing of the shares to the Fund meets the conditions for the application of CGT event K3 to these shares. CGT event K3 will happen just before you pass away.

Question 2

Summary

Any capital gain or capital loss you make from CGT event K3 happening to the shares will be disregarded.

Detailed reasoning

You can generally claim a deduction for gifts made to organisations that are listed on the register of deductible gift recipients, however, testamentary gifts are generally not deductible.

A capital gain or capital loss made from a testamentary gift of property that would have been deductible as a gift if it hadn't been a testamentary gift is disregarded.

Application to your situation

The Fund is endorsed as a deductible gift recipient. Gifts made to it are generally deductible, however, neither you nor your estate will be entitled to claim a gift deduction when the shares are transferred from your estate to the Fund.

The passing of the shares to the Fund meets the conditions for the exemption to apply to any capital gain or capital loss you make from CGT event K3 happening to these shares.