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Edited version of private advice
Authorisation Number: 1052017778988
Date of advice: 10 August 2022
Ruling
Subject: CGT - assets
Question 1
Will the distribution of units in a Property Trust to the residuary beneficiaries, in accordance with the will, fall within the exemption to CGT Event E7?
Answer
Yes. CGT event E7 will not happen when the trustee distributes the units to the residuary beneficiaries in satisfaction of the beneficiary's interest in the trust, because the trust is one to which Division 128 of the Income Tax Assessment Act 1997 applies. Division 128 provides a CGT roll-over when an individual dies and a CGT asset owned just before their death passes to a beneficiary in their estate.
Question 2
Will the distribution of units in a Property Trust to the residuary beneficiaries who are foreign residents, fall within CGT event K3?
Answer
Yes. When a CGT asset of a trust estate (that is not taxable Australian property) passes to a beneficiary who is a foreign resident, CGT event K3 happens. However, any capital gain can be disregarded pursuant to subsection 104-215(5), because the units were acquired by the deceased before 20 September 1985.
This ruling applies for the following periods:
Year ending 30 June 20XX and 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The individual died in 20XX (the deceased).
Probate of the deceased's last will and testament was granted in 20XX.
At the time of death, the deceased was the registered owner of X units in a Property Trust (the units). The units were acquired by the deceased before 20 September 1985.
At the time of the private ruling application the executor/trustee had dealt with all other assets of the estate, which included properties in Australia, shares and units in other property trusts.
The executor/trustee is considering transferring the units as tenants in common to the deceased's X children and to vest the Estate.
The residuary beneficiaries are the X children of the deceased. At the time of the private ruling, X of the X children are foreign residents.
The units are not taxable Australian property.
Relevant legislative provisions
Incom Tax Assessment Act 1997 Division 128
Income Tax Assessment Act 1997 Section 104-85
Income Tax Assessment Act 1997 Section 104-215