| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011776212528
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Capital gains tax - deceased estate - remainder interest
Question 1
Is any net capital gain or capital loss made calculated on the market value of the commercial property on the date of your parent's death which occurred after 30 June 1999?
Answer
Yes.
This ruling applies for the following periods
Year ending 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You parent built a commercial building sometime before 20 September, 1985.
Your parent died sometime after 30 June 1999. In their will your parent bequeathed the commercial property to their trustee, with any income from the property assigned to your other parent for their lifetime. After the death of your other parent the property would pass to you.
Your other parent died several years later. The property was then transferred to you.
You then sold the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-5
Income Tax Assessment Act 1997 Section 104-5
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 104-95
Income Tax Assessment Act 1997 Section 115-10
Income Tax Assessment Act 1997 Section 115-15
Income Tax Assessment Act 1997 Section 115-25
Income Tax Assessment Act 1997 Subsection115-100(a)
Income Tax Assessment Act 1997 Section 116-20
Income Tax Assessment Act 1997 Section 116-30
Income Tax Assessment Act 1997 Subsection 128-15(2)
Income Tax Assessment Act 1997 Section 128-20
Reasons for decision
Question 1
The terms of your parent's will create two things in respect to the commercial property:
A life interest is created in favour of your other parent.
A remainder interest is created in favour of yourself.
This means that although your other parent is entitled to income from the property during their lifetime, the ownership of the asset rests with you.
An asset owned by a deceased is effectively taken to have been acquired by a remainderman on the date of death of the deceased. You are then taken to have acquired the commercial property as at the date of your parent's death, not when the asset was transferred into your name.
As the asset was built by the deceased prior to September 1985 your cost base for the asset will be calculated from the time you are taken to have acquired the asset as at the date of your parent's death, and will be the market value of the asset at that time.
As you are taken to have acquired the asset in after 30 June, 1999, and you are an individual, you can use the discount method when calculating any net capital gain.