Edited version of private advice

Authorisation Number: 1051947740073

Date of advice: 16 March 2022

Ruling

Subject: CGT- testamentary trust

Question

Will the shares 'pass' in accordance with section 128-20 of the Income Tax Assessment Act 1997 (ITAA 1997), such that section 128-15 of the ITAA 1997 will apply to disregard any capital gain or loss for the Trustee of the Trust and the beneficiary determines their relevant cost base in accordance with subsection 128-15(4)?

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 legal personal representative (LPR) is disregarded under section 128-15of 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 trustee for the Trust, will be treated for the purposes of subsection 128-15(3) as an LPR at the time when the property is transferred to a beneficiary as provided for in the deceased's will. Therefore section128-15 applies to disregard any capital gain or loss made by the Trustee of the Trust. The beneficiary's relevant cost base for the shares will be determined in accordance with subsection 128-15(4) item 1 (post-CGT assets) and item 4 (pre-CGT assets).

This ruling applies for the following period:

Year ending 30 Juxx 20XX

The scheme commences on:

XX Xxxber 20XX

Relevant facts and circumstances

A (the deceased) died on XX Xxxber 20XX.

Probate of the deceased's last Will and Testament was granted to B (B), C (C) and D (D) as executors of the deceased's will.

The deceased's last Will dated XX May 20XX, provides in clause X, for the establishment of a testamentary trust to hold all the deceased's shares in publicly listed Australian companies and any bonus shares issued in respect thereto at the time of the deceased's death on trust for the benefit of E (E) as sole beneficiary of the trust, until E reaches XX years at which point the trust will pay the balance of the fund to them.

The E Testamentary Trust (the Trust) was established (as per clause X of the deceased's will) using the terms of the deceased's will as its trust Deed and B, C and D as Trustees of the Trust.

On XX Juxx 20XX, E turned XX years, but requested that the Trust continue until, at least, their XX birthday.

The Trustees of the Trust, along with E agreed to amend the terms of the Trust from E's XX birthday to their XX birthday. The Deed of confirmation of the establishment of the E Testamentary Trust and amendment of its terms was executed in Xxxber 20XX.

D retired as Trustee and executed a Deed of Retirement of Trustee of the E Testamentary Trust.

E turned XX years on XX Juxx 20XX.

The Trustees intend to transfer the assets of the Trust (the shares) to E and vest the Trust in the 20XX-XX income year.

As of the XX Juxx 20XX the market value of shares held by the Trust is approximately $X.

All income of the Trust has been declared in the trust income tax returns.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 128-15

Income Tax Assessment Act 1997 Section 128-20

Income Tax Assessment Act 1997 Section 995-1