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Edited version of private advice
Authorisation Number: 1052405528830
Date of advice: 12 June 2025
Ruling
Subject: CGT - deceased estate
Question 1
Are the beneficiaries presently entitled to income of the Estate in the 20XX to 20XX income years where no distribution has been made to them?
Answer 1
No.
The ongoing obligation for weekly payments to the deceased's former spouse under the Family Court Order and Will and the unregistered mortgage document represents a debt of the deceased at the time of their passing and a continuing obligation to their Estate.
While the obligation for payment to the former spouse exists, the Estate is not fully administered and therefore the residual beneficiaries in relation to the property at Location C are not presently entitled to the income from that property.
Paragraph 9 of Taxation Ruling IT 2622 states:
Beneficiaries cannot enjoy present entitlement to income derived by a deceased estate during the administration of the estate. Income of a deceased estate in income years before the administration of the estate is complete, is the income of the executors or administrators and is not income of the beneficiaries. During the initial stage of the administration no beneficiary is presently entitled to the income derived.
Question 2
Will distributions of cash to the beneficiaries from the Estate make them presently entitled to a share of income in the year of receipt?
Answer 2
Yes.
While the obligation for payment to the former spouse exists, the Estate is not fully administered and therefore the residual beneficiaries in relation to the property at Location C are not presently entitled to the income from that property unless an interim payment is made to them.
If an interim payment is made, the beneficiaries would be deemed to be assessable on a share of the trust income in accordance with section 97(1) of the Income Tax Assessment Act (ITAA 1936). The balance of income would continue to be income to which no beneficiary is presently entitled.
Question 3
Does the payment to the former spouse under the Family Court Order and Will make the former spouse presently entitled to a share of income of the Estate?
Answer 3
No.
The payments to the former spouse are payments made in accordance with the XX 20XX Family Court Order and do not represent the distribution of income, but the payment of an ongoing obligation of the Estate.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
Year ended 30 June 20XX
Year ended 30 June 20XX
Year ended 30 June 20XX
The scheme commenced on:
XX XX 20XX
Relevant facts and circumstances
On XX XX 20XX, the deceased passed away.
Pursuant to the terms of the Will, the Executors and Trustees are the two sons of the deceased.
Real property at Location A was left to Person A.
Real property at Location B was left to Person B and Person C as tenants in common in equal shares.
Property at Location C is to be held by the Trustees and distributed as such:
• $XX a week to be paid to former spouse for the remainder of their life; until such time that they either have a de-facto partner, remarries, leaves Australia permanently or upon their death.
Upon the sale of the property at Location C, sale proceeds are to be divided among the 3 children - but only after the payments to the former spouse ceases.
The estate is not fully administered, and this stage will not be reached during the ruling period.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 97