22 Jul 14 Refinements to the income tax law in relation to deceased estates
The ATO notes that on 14 December 2013, the Assistant Treasurer announced that the ‘Capital gains tax minor amendments ensuring the proper functioning of the capital gains tax provisions – deceased estates’ and the ‘Capital gains tax - refinements to the income tax law in relation to deceased estates’ measures would not be proceeding.
The 'minor amendments ensuring the proper functioning of the capital gains tax provisions – deceased estates’ measure proposed to legislate the current ATO practice of allowing a testamentary trust to distribute an asset of a deceased person without a CGT taxing point occurring. The measure also proposed that the income tax law for deceased estates would be rewritten using a principle-based format and minor technical issues for deceased estates would be fixed.
Law Administration Practice Statement PS LA 2003/12 confirms that the Commissioner "will not depart from the ATO’s long-standing 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 Income Tax Assessment Act 1997".
The ATO confirms that this means that where the assets of a deceased person pass to the ultimate beneficiary of a trust created under the deceased person’s will, any capital gain or loss that might have arisen during this passage will be disregarded.
In relation to the ‘Capital gains tax - refinements to the income tax law in relation to deceased estates measure’ notes that Tax and Superannuation Laws Amendment (2014 Measures No 2) Act 2014 ("the Amending Act" provides protection for taxpayers who have under-assessed their tax position on the basis of previously announced changes that are no longer proceeding.
The ATO confirms that the Amending Act preserves outcomes for taxpayers who anticipated the announcement backdating the application date of the CGT roll-over that was proposed to apply where an intended beneficiary died before administration is completed. The announcement anticipated a modified application date of this previously announced measure to the 2006-07 income year. The protection applies for the period that the announcement of a retrospective change to the law was on foot, which for this measure was the period from 8 May 2012 to 14 December 2013.
For the ATO statements on these matters, go here