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You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private advice

Authorisation Number: 1052189339044

Date of advice: 01 December 2023

Ruling

Subject: CGT - deceased estate

Question 1

Are you entitled to a CGT discount relating to the disposal of the Property for the period of ownership prior to8 May 2012?

Answer

Yes. You are eligible for a CGT discount for your ownership period prior to 8 May 2012. You may use the market value of the CGT asset to quantify any discount capital gain as per subsection 115-115(4).

Question 2

Are you entitled to a CGT discount relating to the disposal of the Property for the period of ownership after8 May 2012?

Answer

No.

This private ruling applies for the following period:

Year ended X June 20XX.

The scheme commenced on:

X July 20XX.

Relevant facts and circumstances

The Property was purchased in 19XX by four owners as tenants in common.

All four original owners were non-residents of Australia for their entire ownership period.

In 19XX, A passed away.

In 20XX, B passed away.

In 20XX, C passed away.

In 20XX, due to administrative errors regarding the grant of probate, you became the sole owner of the Property. You subsequently sold the Property in 20XX.

You were a non-resident of Australia for your entire ownership period.

Relevant legislative provisions

Income Tax Assessment Act section 115-30

Income Tax Assessment Act section 115-105

Income Tax Assessment Act section 115-115

Reasons for decision

You are eligible for a CGT discount for your ownership period prior to 8 May 2012. You may use the market value of the CGT asset to quantify any discount capital gain as per subsection 115-115(4).

Detailed reasoning

Foreign or temporary residents are not eligible to apply the full 50% discount to assets acquired after 8 May 2012. You can only apply the discount to part of your capital gain in either of the following scenarios:

•         you acquired the asset on or before 8 May 2012

•         you had a period of Australian residency after 8 May 2012.

Division 115 of the ITAA 1997 outlines when an entity may be entitled to a discount capital gain. Sections 115-105 and 115-115 operate to calculate the capital gain discount percentage available to non-residents.

Subsection 115-115(2) relates to testing periods that commence after 8 May 2012. The discount percentage is calculated out using the following formula:

Number of days during discount testing period that you

were an Australian resident (but not a temporary resident)

2 x Number of days in discount testing period

For taxpayers that were a foreign or temporary resident during all of the discount testing period the percentage will be 0%.

Subsection 115-115(4) outlines the 'market value' method to calculate the discount percentage for non-residents for testing periods prior to 8 May 2012.

Paragraph 115-115(4)(d) calculates the unrealised capital gain as of 8 May 2012. This is referred to as the 'excess'. If the excess is equal or greater than the discount capital gain, than the standard 50% discount applies (Item 1 of the table). If the excess is less than the discount capital gain, than the discount percentage is worked out under subsection 115-115(5).

For taxpayers who do not (or cannot) choose the market value method in subsection 115-115(4), the discount percentage is calculated using the formula in subsection 115-115(6). As with subsection 115-115(2), the percentage will be 0% for taxpayers that were a foreign or temporary resident during all of the discount testing period.

Item 4 of the table in section 115-30 instructs the beneficiary of a deceased individual's estate to treat the acquisition date of a pre-CGT asset as the date the deceased originally acquired the asset.

Application to your circumstances

Question 1

As the Property was passed to you as the acquirer by the deceased's estate, your acquisition date of the Property is X/XX/XXXX. This is the date the deceased originally acquired the asset, as per item 4 of section 115-30 of the ITAA 1997. Accordingly, you have a discount testing period from that date to 8 May 2012.

You can use the 'percentage using market value' method in subsection 115-115(4) of the ITAA 1997 to calculate what percentage of CGT discount is afforded to you. In order to use this method, you require the market value from around the time of 8 May 2012.

If the 'excess' from 115-115(4)(d) on 8 May 2012 is equal to or greater than the capital gain made at the time of sale, then the discount percentage is 50%.

If the excess, however, is less than the capital gain made at time of sale, then the discount is worked out under subsection (5).

Question 2

Additionally, you have a discount testing period from 8 May 2012 to the date of disposal in 20XX. As you were a non-resident for that entire discount testing period, the percentage of capital gain discount you are afforded during this time period is 0%.