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Edited version of your written advice
Authorisation Number: 1051501255795
Date of advice: 9 April 2019
Ruling
Subject: Deceased estate and capital gains tax (CGT)
Question 1
Will the Commissioner exercise their discretion under subsection 99A(2) of the Income Tax Assessment Act 1936 (ITAA 1936) to assess the undistributed capital gains of the non-resident trust (The Deceased Estate)?
Answer
Yes.
Having considered the circumstances and relevant factors, the Commissioner will exercise the discretion. More information on when a Trustee is assessed can be found by searching for “QC24534” on ato.gov.au
Question 2
Will the Executor be assessed as per a foreign resident individual in sections 115-105 and 115-115 Income Tax Assessment Act 1997 (ITAA 1997) to gains arising from the sale of real property?
Answer
Yes.
Having considered the circumstances and relevant factors, the Commissioner considers that the Trustee will be assessed as an individual on the income arising from the capital gains events. As no beneficiary is presently entitled, nor do they have a vested and indefeasible interest in the Estate, the discount percentage that the Trustee will apply to their discount capital gain is that of an individual under section 115-105 and 115-115 ITAA 1997. More information about the CGT discount for foreign resident individuals can be found by searching for “QC35657” on ato.gov.au
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The deceased was a non-resident of Australia for tax purposes during the relevant periods.
The Deceased passed on a date before DDMMYY leaving assets in Australia and elsewhere.
Three of the properties were purchased after 19 September 1985, but before DDMMYY. Two of the properties were purchased on a date before 19 September 1985. All of the properties were sold in the 2016-17 and 2017-18 financial years and net capital gains have arisen in those years.
The Deceased’s Will provides that the assets are to be distributed to their children who have attained the age of 25. Some of the children have not yet attained the age of 25 and will have their share held on trust until that age is reached. The children are a mix of residents and non-residents of Australia for tax purposes.
The Executor is not a resident of Australia for tax purposes with central management and control of the Deceased Estate maintained outside of Australia.
No beneficiary of the Will has received a distribution from the Executor in the financial year and none are presently entitled to income of the trust under the Will.
To date, the Deceased Estate has not yet been fully administered.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 97
Income Tax Assessment Act 1936 section 98
Income Tax Assessment Act 1936 section 99
Income Tax Assessment Act 1936 section 99A
Income Tax Assessment Act 1997 section 115-30
Income Tax Assessment Act 1997 section 115-105
Income Tax Assessment Act 1997 section 115-110
Income Tax Assessment Act 1997 section 115-115
Income Tax Assessment Act 1997 section 115-120
Income Tax Assessment Act 1997 section 128-15
Further issues for you to consider
The table in section 115-30 ITAA 1997 will modify the acquisition date for the purposes of calculating the discount testing period in section 115-115 ITAA 1997.
Item 3 of the table provides that for a CGT asset the acquirer acquired as the legal personal representative of a deceased individual, except one that was a pre-CGT asset of the deceased immediately before his or her death, then the date of acquisition is taken to be when the Deceased acquired it.
Item 5 of the table provides that a CGT asset the acquirer acquired as the legal personal representative of a deceased individual and that was a pre-CGT asset in the hands of the deceased just before their death will be acquired by the acquirer when the deceased died.
Item 4 of the table in subsection 128-15(4) ITAA 1997 provides that the first element of the cost base and reduced cost base that was acquired by a legal personal representative will be the market value of the asset on the day that the deceased died.