Edited version of private advice

Authorisation Number: 1052405885874

Date of advice: 12 June 2025

Ruling

Subject: Capital gains tax

Question 1

Will your acquisition date for the Listed Shares appropriated to you under the Will be taken to be the date of death of the Deceased under subsection 128-15(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

Yes

Question 2

Will the cost base for the Listed Shares, acquired by the Deceased on or after 20 September 1985 and appropriated to you under the Will, be modified by item 1 of the table in subsection 128-15(4) of the ITAA 1997 to be the Deceased's cost base on the date they died?

Answer 2

Yes

Question 3

Will the cost base for the Listed Shares, acquired by the Deceased before 20 September 1985 and appropriated to you under the Will, be modified by item 4 of the table in subsection 128-15(4) of the ITAA 1997 to be the market value of the Listed Shares on the date the Deceased died?

Answer 3

Yes

This ruling applies for the following period(s)

Income year ending 30 July XXXX

The scheme commenced on

1 July XXXX

Relevant facts and circumstances

Person A (the Deceased) died on XXXX and probate of their last will and testament, dated XXXX (the Will), was granted by the Supreme Court of X on XXXX to the Executors.

The primary assets of the estate at her death were:

•                the Deceased's residence with an approximate value of $XX;

•                cash/term deposits with an approximate value of $XX; and

•                a portfolio of listed securities with an approximate value of $XX (Listed Shares).

The Listed Shares included shares acquired prior to 20 September 1985 and shares acquired after that date, including some bonus shares in respect of the pre-20 September 1985 holdings. Records exist that enable each acquisition of shares to be identified including the date of acquisition and their respective cost bases.

The will

The Deceased's residence and contents are bequeathed to Person B and Person C (as tenants in common). This devise has been given effect and the residence has been transferred to them.

Person D is bequeathed a pecuniary legacy of a sum equal to the value of the residence at the date of death of the Deceased, which has been paid.

The balance of the Estate is to be applied as follows:

•                the payment of debts, funeral and testamentary expenses of the Estate, and

•                the division of the residue into three equal parts and one of such equal parts to be applied as follows:

°                one to Person B and C (the Person B and C Share);•

°                one to Person D (the Person D Share); and

°                one to such charitable bodies (the Charitable Share) and purposes within Australia in such shares and subject to such powers and provisions and generally in such manner as the trustees shall by deed appoint, provided that one of the charitable bodies to benefit is Organisation A (the trusts herein described as the Charitable Trust).

Organisation B is the successor to Organisation A.

Clause 6 of the Will provides:

I direct that my trustees may exercise any powers given them at law and without limitation may in their absolute discretion:

•                sell, call in and convert any property into money or postpone the sale calling in and conversion or retain any properly in the same state of investment without being responsible for loss

•                make loans to beneficiaries or others, secure or unsecured, with or without interest and on whatever terms

•                borrow money and secure loans howsoever on any property

•                without the consent of a beneficiary partition or appropriate any property in or towards the satisfaction of a legacy or share of any beneficiary and determine the value of the property however they deem appropriate

•                invest or hold any asset as if they were beneficially entitled absolutely, and

•                purchase any properly from the estate at fair market value.

Administration of the estate

Full administration of the Estate was not completed by 30 June XXXX.

The following appropriation of Listed Shares in specie was completed in the income year ending 30 June XXXX:

•                one third of the Listed Shares to the Person B and C Share

•                one third of the Listed Shares to the Person D Share, and

•                one third of the Listed Shares to the Executors as trustees of the Charitable Share to be held by them as trustees of the Charitable Trust.

These allocations and appropriations of Listed Shares were validly made in accordance with the Will.

Tax residence status

For the income year ending 30 June XXXX, you are an Australian resident for tax purposes are not under a legal disability for the purposes of Division 6 of the Income Tax Assessment Act 1936 (ITAA 1936).

Reasons for decision

All references are to the ITAA 1997 unless otherwise stated.

Question 1

Summary

The date of acquisition for the Listed Shares is the date of death of the Deceased, however for the purposes of applying the CGT discount for the post-CGT Listed Shares, the date of acquisition is the date the Deceased acquired them.

Detailed reasoning

Division 128 sets out what happens when a CGT asset passes to you as a beneficiary of a deceased estate.

Section 128-20(1) provides that a CGT asset is taken to have passed to a beneficiary when the beneficiary becomes the owner of the asset in any of the following circumstances:

•                under a Will or a Will varied by court order

•                by operation of intestacy law

•                by appropriation to a beneficiary

•                under a Deed or arrangement, or

•                by absolute entitlement

A beneficiary will be taken to have acquired the CGT asset that passes to them on the date the deceased died (subsection 128-15(2)).

In addition, there are special rules in Subdivision 115-A for the date of acquisition when working out whether you are entitled to a CGT discount when a CGT event happens to an asset that passes to you as the beneficiary of a deceased estate. Item 4 of the table in subsection 115-30(1) treats you as acquiring an asset - provided it is not a pre-CGT asset of the deceased immediately before their death - when the deceased acquired it.

Pre-CGT assets are assets acquired before 20 September 1985 (section 149-10).

Application to your circumstances

For the purposes of section 128-20, the Listed Shares 'passed' to you when, under the terms of the Will, they were appropriated to you in specie.

Accordingly, you are taken to have acquired the Listed Shares on the date the Deceased died under subsection 128-15(2).

However, for the purposes of working out if you have a discount capital gain when you dispose of the Listed Shares, you will be treated as having acquired any Listed Shares that are not pre-CGT assets on the date the Deceased acquired the Listed Shares (item 4 of the table in subsection 115-30(1)).

Question 2

Summary

As adequate records in relation to the Listed Shares acquired by the Deceased on or after 20 September 1985 are available to you, the cost base or reduced cost base of the Listed Shares will for you be the Deceased's cost base on the date they died.

Detailed reasoning

Subsection 128-15(4) sets out the modifications to the cost base and reduced cost base of CGT asses that pass to you as a beneficiary of a deceased estate.

Item 1 of the table in subsection 128-15(4) provides that the cost base or reduced cost base of assets that pass to you as a beneficiary of a deceased estate that they acquired on or after 20 September 1985 will be the deceased's cost base of the assets on the date they died.

CGT Determination 33 'TD 33: Capital Gains: How do you identify individual shares within a holding of identical shares?' states:

1. Where a disposal of shares occurs and those shares are able to be individually distinguished e.g. by reference to share numbers or other distinctive rights or obligations attached to them, those shares are identifiable; their date of acquisition and cost base will be a matter of fact.

2. However, on the disposal of shares which form part of a holding of identical shares i.e. of the same class and in the same company, which are acquired over a period of time, it may not always be possible for a taxpayer to distinguish or identify the particular shares that have been disposed of.

3. In these circumstances, the taxpayer will need to decide which particular shares are being disposed of. Taxpayers in this situation will need to keep adequate records of the transaction so that the decision can be supported should the income tax return be subject to Tax Office scrutiny at a later date.

Subsection 121-20(1) states that you must keep records of every act, transaction, event or circumstance that can reasonably be expected to be relevant to working out whether you have made a capital gain or capital loss from a CGT event.

Subsection 121-25(2) sets out that you must retain the records until the end of 5 years after it becomes certain that no CGT event, or no further CGT event, can happen such that the records could reasonably be expected to be relevant to working out whether you have made a capital gain or capital loss from the event.

Application to your circumstances

The Executors have records that identify the company each Listed Share is in, along with the date of acquisition, quantity, and cost of each Listed Share. The Listed Shares appropriated to you were fully identified and documented on appropriation. Adequate records are available to you to determine when the Listed Shares were acquired by the Deceased.

Accordingly, provided these records are maintained by you, your cost base of any Listed Share that was acquired by the Deceased on or after 20 September 1985 will be modified by item 1 of the table in subsection 128-15(4) to be the Deceased's cost base on the date they died.

You will need to retain these records and any other relevant records in working out whether you make a capital gain or a capital loss on the Listed Shares for five years after it becomes certain no other CGT event will happen to in the Listed Shares, or you have applied all capital losses relevant to the Listed Shares.

Question 3

Summary

As adequate records in relation to the Listed Shares acquired by the Deceased prior to 20 September 1985 are available to you, the cost base or reduced cost base of the Listed Shares will for you be the market value of the Listed Shares on the date the Deceased died.

Detailed reasoning

Again, subsection 128-15(4) sets out the modifications to the cost base and reduced cost base of CGT assets that pass to you as a beneficiary of a deceased estate.

Item 4 of the table in subsection 128-15(4) provides that the cost base or reduced cost base of assets that pass to you as a beneficiary of a deceased estate that they acquired before 20 September 1985 will be the market value of the assets on the date they died.

Application to your circumstances

Again, the Executors have records that identify the company each Listed Share is in, along with the date of acquisition, quantity, and cost of each Listed Share. The Listed Shares appropriated to you were fully identified and documented on appropriation. Adequate records are available to you to determine when the Listed Shares were acquired by the Deceased.

Accordingly, provided these records are maintained by you, your cost base of any Listed Share that was acquired by the Deceased before 20 September 1985 will be modified by item 4 of the table in subsection 128-15(4) to be the market value of the Listed Share on the date they died.

You will need to retain these records and any other relevant records in working out whether you make a capital gain or a capital loss on the Listed Shares for five years after it becomes certain no other CGT event will happen to in the Listed Shares, or you have applied all capital losses relevant to the Listed Shares.