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Edited version of your written advice
Authorisation Number: 1051207170822
Date of advice: 8 May 2017
Ruling
Subject: Capital gains tax
Question 1
Will the pre-CGT shares of the estate which were acquired by the deceased before 20 September 1985 retain their pre-CGT status when you receive your parcel of the shares?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2017
Year ended 30 June 2018
Year ended 30 June 2019
Year ended 30 June 2020
Year ended 30 June 2021
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You were named to inherit shares in a deceased person's Will.
Before the shares would be assigned to you all dividends would go to a third person for their life.
The writer of the Will died before 25 September 1985.
The shares were transferred to you following the third party's death after 25 September 1985.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 128-15
Income Tax Assessment Act 1997 subsection 104-10(5)
Reasons for decision
A capital gain or capital loss is made when a capital gains tax (CGT) event happens to a CGT asset. A CGT event occurs when there is a change in legal ownership of a CGT asset.
However, subsection 104-10(5) of the ITAA 1997 states that a capital gain or capital loss that is made is disregarded if the CGT asset is acquired prior to 20 September 1985.
Section 128-15 of the Income Tax Assessment Act 1997 states where an asset passes to a beneficiary under the Will of a deceased person, the asset is deemed to have been acquired on the date of death of the deceased.
In some circumstances, the deceased may provide in their Will that a person, other than the beneficiary, is to have a life interest in the income of the estate. If this is the situation, the beneficiary, or remainder man, of the estate will not be entitled to the income and/or capital of the estate until the date of death of the life tenant.
Even though the asset does not pass to the beneficiary until after the death of the life tenant, the beneficiary is taken to have acquired the asset at the date of death of the deceased. Therefore, where the deceased died before 20 September 1985 the beneficiary is taken to have acquired the asset before that date.
In your situation, although the shares did not pass to you until after the death of the third party after 20 September 1985, you are taken to have acquired the shares on the date of death of the writer of the will. Therefore, any capital gain or loss realised on the sale of the shares will be disregarded.