Edited version of private advice

Authorisation Number: 1052217932966

Date of advice: 5 January 2024

Ruling

Subject: CGT - express trust

Question

Will the disposal of the property owned by the Trust be subject to Capital gains tax (CGT)?

Answer

No.

The property was acquired by the Trust prior to DD MM 19YY, and was held on Trust for the beneficiary since that time by the initial trustee, followed by Trustee 2 and Trustee 3 as joint Trustees in 20XX following the initial Trustee's death, followed by Trustee 3 as the sole trustee in 20XX.

CGT event A1 does not occur where there is merely a change of Trustee as stated in the note to subsection 104-10(2) of the Income Tax Assessment Act 1997. As such, despite there being changes of Trustees over the period the property has been owned by the Trust, the property retains its pre-CGT status.

Therefore, the sale of the property by the Trust will be exempt from CGT under subsection 104-10(5) of the ITAA 1997 as it will be a disposal of a pre-CGT asset.

This ruling applies for the following period:

Year ending 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

Several decades ago, individual 1 purchased a property in Australia (the property). Following the purchase, individual 2 also lived in the property, along with Individual 3 and Individual 4 who were minors at the time.

Individual 1 and individual 2 made the decision to stop living together in the property several years after purchasing the property, and under legal proceedings there was a Deed of Trust drawn up to cover the settlement.

The settlement gave individual 2 a life tenancy in the property while the ownership and costs remained with individual 1. However, following the settlement individual 1 (also the initial Trustee) was holding the property on trust for individual 2 (also the beneficiary) under the terms of the Deed of Trust, and the property was to remain in the initial trustee's name until their death.

You have supplied a copy of the Court Orders for the settlement, which specifies that the initial trustee was ordered to execute a declaration of trust that they hold the property for the beneficiary until their death, and thereafter for the benefit of individual 3 and individual 4 as tenants-in-common in equal shares.

Since the settlement was finalised, the beneficiary has remained living in the property continuously.

The initial trustee passed away several years ago, and their Will left the property to individual 3 and individual 4 in equal shares as tenants in common, however individual 3 (also Trustee 2) and individual 4 (also Trustee 3) both owned the property at that time as Trustees of the Trust, on behalf of the beneficiary.

Trustee 3 passed away several years after the initial trustee passed away, and their will left their share of the property to Trustee 2 as the sole owner, and the sole Trustee of the Trust, holding the property on behalf of the beneficiary.

The beneficiary is now elderly, and is looking to sell the property and find a more suitable property to live in.

Under the terms of the settlement and Deed of Trust, Trustee 2 as the sole trustee you must provide the beneficiary with a place to live.

Trustee 2 intends on listing the property for sale and selling the property as soon as possible.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10