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Edited version of private advice
Authorisation Number: 1051949439522
Date of advice: 3 March 2022
Ruling
Subject: Capital gains tax
Question 1
Will any capital gain or loss be disregarded on the sale of the properties?
Answer
Yes. The residual beneficiaries, Individual X, Individual Y and Individual Z, have inherited properties via a deceased estate. While legal title was not transferred to them until sometime after the deceased passed away, it has 'passed' under the deceased's will and Division 128 of the Income Tax Assessment Act 1997 (ITAA 1997) provides what the acquisition date will be for capital gains tax (CGT) purposes. As per subsection 128-15(2) of the ITAA 1997, this is the date of the deceased's death - which in this case is pre-CGT. Therefore, the properties are pre-CGT assets for these beneficiaries and exempt from CGT when sold.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The deceased passed away before 20 September 1985, leaving a will.
Under the will, the deceased left their estate as follows:
• The main residence and personal chattels to their spouse
• The residual of their estate after payment of all funeral and testamentary expenses and all probate and estate duties was transferred to their Trustee upon trust to pay the net income of the residue to the spouse for their life and after their death divide the capital and income of the residuary estate in equal shares to the Residuary Beneficiaries.
The Residuary Beneficiaries are Individual X, Individual Y and Individual Z.
On X August 19XX the executor of the estate was granted probate of the will. Pursuant to the will, the Trustee transferred to the spouse the main residence and personal chattels and has paid all debts, funeral and testamentary expenses and all probate and estate duties.
The Residuary Assets of the estate were properties.
Each year until X July 20XX, the Trustee paid the net income of the residuary estate to the spouse.
On X June 20XX a Deed of Family Arrangement was entered into between the Trustee, the spouse and the Residuary Beneficiaries with effect from X July 20XX. The spouse surrendered their life interest in that part of the residuary estate and that the residue of the estate be divided between the Residuary Beneficiaries in accordance with the will of the deceased.
In September 20XX title to the properties was transferred from the Trustee to the Residuary Beneficiaries.
A real estate agent has been appointed to sell the properties at auction in March 20XX. It is expected that the properties will sell at auction, or soon after.
Relevant legislative provisions
Income Tax Assessment Act 1997 - subsection 128-15(2)