Edited version of private advice

Authorisation Number: 1052010555556

Date of advice: 26 July 2022

Ruling

Subject: Commissioner's discretion - deceased estate

Question 1

Is the Estate a resident trust for Australian income tax purposes?

Answer

Yes. The Administrators are Trustees of the Estate under section 6 of the Income Tax Assessment Act 1936 (ITAA 1936). The Trustees are Australian residents during the relevant income years. Accordingly, the Estate is a resident trust for the purposes of Division 6 of Part III of the ITAA 1936 under subsection 95(2) of the ITAA 1936, and a resident trust for CGT purposes under subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997).

Question 2

Will the Commissioner exercise his discretion under subsection 99A(2) of the ITAA 1936 to tax the Trustees on income that no beneficiary is presently entitled to under section 99 of the ITAA 1936?

Answer

Yes. After consideration of the relevant factors, the Commissioner is of the opinion that it would be unreasonable that section 99A of the ITAA 1936 should apply in relation to the Trustees of the Estate in the relevant income years. Accordingly, section 99 of the ITAA 1936 will apply.

Question 3

Will the Trustees be entitled to apply the 50% capital gains tax discount on the sale of the Property under Division 115 of the ITAA 1997?

Answer

Yes. The Property was a pre-CGT asset of the deceased immediately before their death. Under subsection 115-30(1) of the ITAA 1997, the Trustees are treated as having acquired the Property when the deceased died on XX/XX/XXXX. The Trustees have held the Property for more than 12 months and as such, they will be entitled to apply the 50% CGT tax discount upon the sale of the Property.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 2020

Relevant facts and circumstances

The deceased (a foreign resident) died on XX/XX/XXXX. The deceased died holding Australian assets, including a pre-CGT Property.

The deceased's Will appointed foreign residents to be their personal representatives. Following the deceased's death, the deceased's personal representatives appointed Administrators to be their Attorneys for the purpose of obtaining probate of the deceased's Will in Australia and administering the deceased's Australian estate (Estate). The Administrators are Australian residents.

The Administrators' application for Letters of Administration with the Will was granted on XX/XX/XXXX. The Administrators are in the process of finalising the administration of the Estate and selling the Property. No loans have been or will be made to or from the Estate. No person has or will directly or indirectly transferred money or property to the Estate.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 6

Income Tax Assessment Act 1936 Section 95

Income Tax Assessment Act 1936 Section 99

Income Tax Assessment Act 1936 Section 99A

Income Tax Assessment Act 1997 Division 115

Income Tax Assessment Act 1997 Section 995-1