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Edited version of private advice
Authorisation Number: 1052270106624
Date of advice: 1 August 2024
Ruling
Subject: CGT - deceased estates - foreign property
Question
Will the capital gain made on the disposal of your interest in the Property be disregarded?
Answer
Yes.
You owned an interest in a Property as the successor beneficiary to someone who died before 20 September 1985. Under section 128-15 of the Income Tax Assessment Act 1997 (ITAA 1997), you are taken to have acquired the Property on the date of the deceased's death.
Therefore, your ownership interest in the Property will not be subject to capital gains tax.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
XX July 20XX
Relevant facts and circumstances
Sometime before 20 September 1985, your great grandparents purchased a building containing XX apartments, in Country A.
Shortly after, a Foreign Government took over ownership of the Property.
A few years later, before 20 September 1985, your great grandparents passed away.
Their wishes were that 50% of the Property should go to your grandparent and the other 50% to your grandparent's two siblings. There was no change of ownership at this stage as ownership remained with the Foreign Government.
Your grandparent passed away before 20 September 1985.
Several years later, after 20 September 1985, your parent (Parent A) passed away.
In 20XX, your parent's sibling (Sibling A) applied to the courts in Country A for rightful ownership of the Property.
Prompted by their actions, you and your other parent (Parent B) engaged the services of your own legal representatives.
Over the next XX years, there was a battle between your family members and the courts over the ownership of the Property.
In 20XX the Courts in Country A made a decision acknowledging the rightful ownership of the Property.
Your great grandparents' interest in the Property was returned to them and since they had already passed away, formed part of their Estate.
Although it was your great grandparents' wish that 50% of the ownership interest go to your grandparent, your grandparent had also since passed away.
Your grandparent's 50% share was to be split between her three children; Parent A, Sibling A and Sibling B, who were each to receive a 1/6 share.
Parent A had died intestate. Under Country A's law, you and Parent B inherited their 1/6 share in the Property, (which equated to one apartment); 50% of the 1/6 interest to you, and 50% of the 1/6 interest to Parent B.
Therefore you have inherited a 1/12 interest in the Property as successor beneficiary directly from your great grandparents' estate.
You and Parent B have recently sold your interest in the Property and a capital gain was made on its disposal.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 128-15
Income Tax Assessment Act 1997 Section 128-20