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Edited version of private advice
Authorisation Number: 1051553606433
Date of advice: 23 July 2019
Ruling
Subject: Capital gains tax - deceased estate - life interest - deed of family arrangement
Question
Will the capital gains tax (CGT) assets of the estate pass to ('A') as a beneficiary in the estate under section 128-20(1)(d) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
The deed of arrangement which will cause the CGT assets of the Estate to pass to 'A' will be entered into prior to the administration of the estate being completed and to settle a claim made by 'A' to vary the will.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on
1 July 20XX
Relevant facts
The deceased passed away in 20xx.
Probate was granted in 20xx.
The deceased left a number of CGT assets.
Under the will of the deceased, the deceased's spouse, 'A', was granted a life interest. The remainder beneficiaries are the deceased's children.
'A' considers that the life interest does not adequately provide for her and as a result 'A' and the deceased's children have prepared a draft family deed to vary the terms of the deceased's will.
The result of the deed of family arrangement is that the executors and the remainder beneficiaries will vary the will so that 'A' becomes absolutely entitled to the entire estate of the deceased.
The deed will be formally entered into prior to 30 June 20XX.
'A' has not provided any consideration for entering into the deed of family arrangement.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 subsection 118-130(3)
Income Tax Assessment Act 1997 subsection 128-20(1)(d)