Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-3 - CAPITAL GAINS AND LOSSES: SPECIAL TOPICS  

Division 128 - Effect of death  

General rules  

SECTION 128-15   Effect on the legal personal representative or beneficiary  

128-15(1)    
This section sets out what happens if a *CGT asset you owned just before dying:

(a) devolves to your *legal personal representative; or

(b) *passes to a beneficiary in your estate.

Note 1:

Section 128-25 has different rules if the asset passes to a beneficiary in your estate who is the trustee of a complying superannuation entity.

Note 2:

If the beneficiary is an exempt entity, Division 57 in Schedule 2D to the Income Tax Assessment Act 1936 has rules about exempt entities that become taxable. It sets out what the entity is taken to have purchased its assets for when it becomes taxable.

Note 3:

If the beneficiary is a foreign resident, Subdivision 855-B sets out what happens if the beneficiary becomes an Australian resident. The beneficiary is taken to have acquired each asset owned just before becoming an Australian resident for the market value of the asset at that time.

128-15(2)    
The *legal personal representative, or beneficiary, is taken to have *acquired the asset on the day you died.

Special rule for legal personal representative

128-15(3)    
Any *capital gain or *capital loss the *legal personal representative makes if the asset *passes to a beneficiary in your estate is disregarded.

Cost base rules for both

128-15(4)    

This table sets out the modifications to the *cost base and *reduced cost base of the *CGT asset in the hands of the *legal personal representative or beneficiary.

Modifications to cost base and reduced cost base
Item	For this kind of CGT asset:	The first element of the asset ' s cost base is:	The first element of the asset ' s reduced cost base is:
1	One you *acquired on or after 20 September 1985, except one covered by item 2, 3, 3A or 3B	the *cost base of the asset on the day you died	the *reduced cost base of the asset on the day you died
2	One that was *trading stock in your hands just before you died	the amount worked out under section 70-105	the amount worked out under section 70-105
3	A *dwelling that was your main residence just before you died if: (a) the dwelling was not then being used for the *purpose of producing assessable income; and (b) you were not then an *excluded foreign resident	the *market value of the *dwelling on the day you died	the market value of the *dwelling on the day you died
3A	If you were a foreign resident just before you died - an asset that was not *taxable Australian property just before you died, except one covered by item 2	the *market value of the asset on the day you died	the market value of the asset on the day you died
3B	One that *passes to a trustee of a *special disability trust	the *market value of the asset on the day you died	the market value of the asset on the day you died
4	One you *acquired before 20 September 1985	the *market value of the asset on the day you died	the market value of the asset on the day you died

Note 1:

Section 70-105 has a general rule that the person on whom the trading stock devolves is taken to have bought it for its market value. There are some exceptions though.

Note 2:

Subdivision 118-B contains other rules about dwellings acquired through deceased estates.

Note 3:

The rule in item 3 in the table does not apply to a dwelling that devolved to your legal personal representative, or passed to a beneficiary in your estate, on or before 7.30 pm on 20 August 1996: see section 128-15 of the Income Tax (Transitional Provisions) Act 1997 .

Further rule for a beneficiary

128-15(5)    
A beneficiary can include in the *cost base or *reduced cost base of the asset any expenditure that the *legal personal representative would have been able to include at the time the asset *passes to the beneficiary. The beneficiary can include the expenditure on the day the representative incurred it.

Example:

You die on 1 May 1995 owning land. On 15 June 1995 your legal personal representative pays $500 council rates for the land.

On 31 July 1995 your representative transfers it to a beneficiary in your estate, who is taken to have acquired it on 1 May 1995.

The beneficiary can include the $500 in the third element of the cost base of the land. It is included on 15 June 1995.

Collectables and personal use assets

128-15(6)    
The *legal personal representative or beneficiary is taken to have *acquired a *collectable or a *personal use asset if:

(a) you acquired it on or after 20 September 1985; and

(b) it was a *collectable or a *personal use asset (as appropriate) in your hands when you died.

Note 1:

Capital losses from collectables can be used only to reduce capital gains from collectables: see section 108-10 .

Note 2:

Capital losses from personal use assets are disregarded: see section 108-20 .