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Edited version of private advice
Authorisation Number: 1051889010181
Date of advice: 25 August 2021
Ruling
Subject: Deceased estate and transfer of property to beneficiaries
Question 1
Is the acquisition date of the properties for the relevant beneficiaries the date of death of the deceased?
Answer
Yes.
Under subsection 128-15(2) of the Income Tax Assessment Act 1997 (ITAA 1997) a beneficiary is taken to have acquired the asset on the date of the deceased's death.
Question 2
Does the estate need to declare any capital gains in relation to distributing these properties to the beneficiaries?
Answer
No.
Under subsection 128-15(3) of the ITAA 1997 any capital gain or loss the legal personal representative makes when the asset is passed to a beneficiary of the estate is disregarded.
Question 3
Is the cost base for property 1 the market value on the deceased's death for the three beneficiaries?
Answer
Yes.
Under item 3 of the table in subsection 128-15(4) of the ITAA 1997, the cost base for a property which was the deceased's main residence at the date of death is market value on the date of death.
Question 4
Did property 2 pass to A as a beneficiary?
Answer
Yes.
Under paragraph 128-20(1)(d) of the ITAA 1997 a CGT asset passes to a beneficiary under a deed of arrangement if, the beneficiary entered into the deed to settle a claim in the distribution of the estate and no external consideration was given for this variation.
Question 5
Will A's cost base of property 2 be the cost base of the deceased on the date of death?
Answer
Yes.
Under item 1 of the table in subsection 128-15(4) of the ITAA 1997, for an asset which was acquired after 20 September 1985 and does not meet the criteria in items 2, 3, 3A or 3B of the table, the deceased's cost base on the date of death becomes the cost base of the beneficiary.
Question 6
Did property 3 pass to B as a beneficiary?
Answer
Yes.
Under paragraph 128-20(1)(d) of the ITAA 1997 a CGT asset passes to a beneficiary under a deed of arrangement if, the beneficiary entered into the deed to settle a claim in the distribution of the estate and no external consideration was given for this variation.
Question 7
Will B's cost base of property 3 be the cost base of the deceased on the date of death?
Answer
Yes.
Under item 1 of the table in subsection 128-15(4) of the ITAA 1997, for an asset which was acquired after 20 September 1985 and does not meet the criteria in items 2, 3, 3A or 3B of the table, the deceased's cost base on the date of death becomes the cost base of the beneficiary.
Question 8
Did property 4 pass to C as a beneficiary?
Answer
Yes.
Under paragraph 128-20(1)(d) of the ITAA 1997 a CGT asset passes to a beneficiary under a deed of arrangement if, the beneficiary entered into the deed to settle a claim in the distribution of the estate and no external consideration was given for this variation.
Question 9
Will C's cost base of property 4 be the cost base of the deceased on the date of death?
Answer
Yes.
Under item 1 of the table in subsection 128-15(4) of the ITAA 1997 an asset which was acquired after 20 September 1985 and does not meet the criteria in items 2, 3, 3A or 3B of the table, the deceased's cost base on the date of death becomes the cost base of the beneficiary.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
The scheme commences on:
XX XXXX 20XX
Relevant facts and circumstances
Mr X and Mrs X purchased XXX properties as joint tenants, after 20 September 1985.
Property 1 was Mr and Mrs X's main residence.
Property 2, Property 3, and Property 4 were owned by Mr and Mrs X as investment properties.
Mr X passed away on XX XXXX 20XX intestate.
Mr X's shares of the property therefore passed to Mrs X by survivorship, making her sole owner of all four properties.
Mrs X was in a nursing home when Mr X passed away and lacked capacity to update her Will.
Mr and Mrs X's three children (A, B and C), all beneficiaries of Mrs X's Will, entered into a deed of family arrangement on XX XXXX 20XX (stamped on XX XXXX 20XX) agreeing to split Mrs X's estate equally between all three beneficiaries, as per clause X.X of the Deed of Family Arrangement (see below):
The Parties intend and agree that the overall result from the distribution of the collective estates of Mr X and Mrs X will be that each of A, B and C will each receive one third of the total value of the collective estates of Mr X and Mrs X and to the extent necessary an appropriate adjustment will be made on the division of Mrs X's estate.
Mrs X passed away on XX XXXX 20XX.
Under the deed of family arrangement:
• Property 1 passed to all three beneficiaries equally as tenants in common
• Property 2 passed in full to A
• Property 3 passed in full to B
• Property 4 passed in full to C.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 128-15(2)
Income Tax Assessment Act 1997 subsection 128-15(3)
Income Tax Assessment Act 1997 subsection 128-15(4)
Income Tax Assessment Act 1997 subsection 128-20(1)
Income Tax Assessment Act 1997 paragraph 128-20(1)(d)