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Edited version of private advice
Authorisation Number: 1051648662461
Date of advice: 19 March 2020
Ruling
Subject: Income tax - capital gains tax
This ruling applies to the beneficiaries of the trust and to the trustee and to any future trustees, for as long as the ruling remains current.
Question 1
Does the deed of family arrangement (DOFA) constitute a deed of arrangement for the purposes of section 128-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. The beneficiaries entered into a deed of family arrangement on XX XXX XXXX to settle a claim in the distribution of the deceased's estate in consideration of their respective entitlements to assets that formed part of the deceased estate. We consider that under these circumstances the deed will satisfy paragraph 128-20(1)(d) of the ITAA 1997.
Question 2
Will the assets owned by the deceased at their date of death and which pass to the beneficiaries trigger a capital gain event?
Answer
Yes. However as the assets were owned just before the date of death of the deceased, the capital gain or capital loss is disregarded under section 128-10 of the ITAA 1997.The assets are considered to be acquired by the beneficiaries on 20XX.
Question 3
Pursuant to the will of the deceased and the DOFA for assets disposed of by the trustee would they have been deemed to be acquired by the trustee at the date of death under section 128-15(2) of the ITAA 1997?
Answer
Yes. The legal personal representative (trustee) is taken to have acquired the assets on the date of death of the deceased.
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 died in 20XX and they left a will.
Within the deceased's will were appointed executors and trustees to administer the deceased's estate.
The will stipulated certain conditions involving the deceased's assets at the time of their death and were provided for to their spouse or on trust. When the stipulated conditions were met or terminated the residuary estate went to a named beneficiary.
The deceased had X adopted children.
The will was challenged by their children and their spouse.
The deceased had assets at date of death.
In 20XX, a Deed of Family Arrangement (DOFA) was executed between the deceased's children and spouse.
The DOFA stated certain instructions that had to occur within a specific timeframe to be distributed in equal shares to the deceased's children and spouse.
Assets were disposed of by the trustee in the 20XX financial year.
Some assets of the estate were distributed to beneficiaries.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 128-10
Income Tax Assessment Act 1997 section 128-15
Income Tax Assessment Act 1997 section 128-20