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%.