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Edited version of private advice
Authorisation Number: 1051801058116
Date of advice: 9 February 2021
Ruling
Subject: Capital gains tax
Question 1
Will the Commissioner treat the trustees of the Testamentary Trust (TT) in the same way as a legal personal representative (LPR) for the purposes of Division 128, in particular subsection 128-15(3) in accordance with PS LA 2003/12Capital gains tax treatment of the trustee of a testamentary trust?
Answer
Yes
Division 128 of the ITAA 1997 deals with CGT consequences that arise from a deceased estate.
Any capital gain or loss made by a trustee of a deceased estate (or LPR) is disregarded under section 128-15 of the ITAA 1997 if an asset of the estate 'passes' to a beneficiary in accordance with section 128-20. The trustee of a testamentary trust is treated in the same manner as the trustee of a deceased estate or LPR for the purposes of applying Division 128 of the ITAA 1997 (PS LA 2003/12). The trustees of TT will be treated for the purposes of subsection 128-15(3) as a LPR at the time when an in specie distribution of the properties to Family Trust X, a beneficiary as provided for in the deceased's will, occurs. Therefore section 128-15 applies to disregard any capital gain or loss made by TT.
Question 2
Will the Commissioner confirm that he will apply the ATO practice as set out in PS LA 2003/12 to the trustees of TT in relation to the transfer of the properties to Family Trust X and disregard the capital gain that arises when these assets are transferred?
Answer
Yes.
For the reasons explained in the analysis contained in Question 1, The Commissioner confirms that PS LA 2003/12 has application in relation to the transfer of the properties by the trustees of TT to Family Trust X.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
TT was created by the will of the deceased who died on XX/month/20XX.
A grant of probate was made in favour of Individual A and Individual B on XX/month/20XX.
Individual A and Individual B are the Trustees of TT.
The class of beneficiaries named in the deceased's will includes related entities of the deceased's descendants.
The Trustees of TT may, in their discretion, distribute capital to a Beneficiary.
On XX/month/20XX the Trustees of TT passed the resolution to resolve that properties would be transferred to Family Trust X.
All of the properties were assets of the deceased at the time of their death.
Family Trust X meets the class of beneficiaries included in the deceased's will.
The Family Trust X has agreed the cost base of the properties will be equal to the TT trustee's cost base.
Relevant legislative provisions
Subsection 128-15(3) of the Income Tax Assessment Act 1997
Section 128-20 of the Income Tax Assessment Act 1997