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15 Apr 14 PS LA 2003/12 (tax treatment of a trustee of a testamentary trust) amended

On 10 April 2014, the ATO amended PS LA 2003/12 entitled "Capital gains tax treatment of a trustee of a testamentary trust for the purposes of Division 128 of the Income Tax Assessment Act 1997 ('the ITAA 1997')".

The purpose of the Practice Statement is to inform ATO personnel that the Commissioner will not depart from the long-standing administrative practice of treating the trustee of a testamentary trust in the same way that a "legal personal representative" is treated for the purposes of Division 128 of ITAA 1997.

The former Labor Government announced in the 2011-12 Budget that it would amend the CGT provisions in order to provide greater certainty for taxpayers by fixing technical deficiencies, removing anomalies and addressing unintended outcomes in the law. One such amendment was intended to ensure that no CGT taxing point happens when an asset passes from a testamentary trustee. However, the current Government announced on 14 December 2013 that this amendment would not be proceeding. All references in the Practice Statement to the announced changes have been deleted.

Despite the Government's failure to clarify the law, the Practice Statement confirms the Commissioner's previous administrative practice, namely:

"This practice statement informs ATO personnel that the Commissioner will not depart from the ATO's long-standing administrative practice of treating the trustee of a testamentary trust in the same way that a legal personal representative is treated for the purposes of Division 128 of the ITAA 1997, in particular subsection 128-15(3)."

In addition, the Practice Statement has been amended by adding para 4 "to provide further clarity on the administrative practice".

Para 4 reads:

"In accordance with this practice, the cost base and reduced cost base of the asset in the hands of the ultimate beneficiary will be determined by reference to the cost base and reduced cost base of the asset in the hands of the legal personal representative. This means, for example, that if the asset was acquired by the deceased before 20 September 1985 (that is, pre-CGT) it will have an acquisition cost equal to the market value at the date of the deceased's death. Or if the asset was acquired by the deceased on or after 20 September 1985, the ultimate beneficiary's acquisition cost will be determined in accordance with items 1, 2, 3 or 3A of the table in subsection 128-15(4) of the ITAA 1997."


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