Taxation Ruling
TR 2006/14A2 - Addendum
Income tax: capital gains tax: consequences of creating life and remainder interests in property and of later events affecting those interests
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Addendum
This Addendum is a public ruling for the purposes of the Taxation Administration Act 1953. It amends Taxation Ruling TR 2006/14 to include exceptions to capital gains tax events for granny flat arrangements and edit for accessibility requirements.
TR 2006/14 is amended as follows:
Omit the preamble; substitute:
Relying on this Ruling
This publication (excluding appendixes) is a public ruling for the purposes of the Taxation Administration Act 1953.
If this Ruling applies to you, and you correctly rely on it, we will apply the law to you in the way set out in this Ruling. That is, you will not pay any more tax or penalties or interest in respect of the matters covered by this Ruling.
(a) Omit footnote 1.
(b) After 'Income Tax Assessment Act 1997', insert '(ITAA 1997)'.
(c) After the paragraph, insert new paragraph 4A:
4A. All legislative references in this Ruling are to the ITAA 1997, unless otherwise indicated.
Omit the dot points; substitute:
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- original asset – the asset in respect of which life and remainder interests are created;
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- original owner – the entity that owned the asset immediately before it became trust property or was transferred to life and remainder owners;
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- life interest – an interest in the income of a trust for life or an estate for life in real property not held on trust;
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- life interest owner – an entity who owns a life interest;
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- remainder interest* – an interest in the capital of a trust or an estate in remainder in real property not held on trust;
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- remainder owner* – an entity that owns a remainder interest; and
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- trustee – the legal owner of an asset held on trust for the benefit of life interest and remainder owners (including a legal personal representative of a deceased estate where the deceased's assets are to be held on trust for the benefit of life interest and remainder owners).
- *In this Ruling, a remainder should be read as including a reversion unless the context suggests otherwise.
Omit 'asset(s)'; substitute 'asset'.
After 'Further', insert a comma.
After 'arose', insert parenthesis.
(a) In the heading, omit 'trustee/remainder'; substitute 'trustee or remainder'.
(b) In footnote 3, omit 'Taxation Ruling TR 2004/D25'; substitute:
Draft Taxation Ruling TR 2004/D25 Income tax: capital gains: meaning of the words 'absolutely entitled to a CGT asset as against the trustee of a trust' as used in Parts 3-1 and 3-3 of the Income Tax Assessment Act 1997
After 'PS LA 2003/12', insert 'Capital gains tax treatment of the trustee of a testamentary trust'.
Omit the formula; substitute:
cost base of asset × (capital proceeds from CGT event ÷ (capital proceeds from CGT event + market value of the remaining part of the asset))
After 'suggested that', insert 'former'.
At the end of the second sentence, insert new footnote 9A:
9A The creation, variance or termination of an eligible granny flat arrangement will be exempt from any CGT events per Division 137 of the ITAA 1997. All future references in this Ruling to CGT event D1 should be considered with regard to Division 137.
Omit 'cost base/reduced cost base'; substitute 'cost base or reduced cost base'.
In footnote 10, omit 'Law Administration Practice Statement'.
After 'PS LA 2005/1 (GA)', insert 'Taxation of capital gains of a trust (now withdrawn)'.
Omit 'executor/trustee'; substitute 'executor or trustee'.
Omit '1/4'; substitute 'one-quarter'.
(a) Omit '((1/4 x $1,200,000) - (1/4 x $400,000))'; substitute '((0.25 × $1,200,000) − (0.25 × $400,000))'.
(b) Omit '((1/4 x $1,200,000) - $175,000)'; substitute '((0.25 × $1,200,000) − $175,000)'.
Omit the first sentence; substitute:
The trustee of the testamentary trust will make a capital gain of $600,000 (0.75 × $1,200,000 − 0.75 × $400,000) from CGT event E7 happening in relation to the disposal of the remaining three-quarters of the land to Hector's daughters to satisfy their interests in the trust.
Omit 'Law Administration Practice Statement'.
After 'TR 2006/10', insert 'Public Rulings'.
In footnote 17, omit 'Taxation Ruling'; substitute 'Draft Taxation Ruling'.
(a) Omit the wording of the paragraph (excluding the quote); substitute:
Paragraphs 16 to 18 of Taxation Ruling IT 2561 Income tax : capital gains : grants of easements, profits a prendre and licences (now withdrawn) provided that certain interests in real property are to be treated as created interests for CGT purposes. While IT 2561 has now been withdrawn to form part of the consolidated Taxation Determination TD 2018/15 Income tax: capital gains: does CGT event D1 happen if a taxpayer grants an easement, profit à prendre or licence over an asset?, the ATO view has not changed and these paragraphs remain relevant (noting that the section references are to the ITAA 1936):
(b) In footnote 18, after TD 93/235, insert:
Income tax: capital gains: how are grants of easements treated for the purposes of the capital gains tax (CGT) provisions of the Income Tax Assessment Act 1936? (now withdrawn)
Omit the wording of the paragraph; substitute:
Former subsection 160ZX(1) of the ITAA 1936 (rewritten as CGT event E5) excluded 'an estate of a deceased person'. Former subsection 160ZX(2) of the ITAA 1936 (CGT event E7), former section 160ZYA of the ITAA 1936 (CGT event E6) and former section 160ZYB of the ITAA 1936 (CGT event E8) contained exclusions for 'a trust that arose upon or resulted from the death of a person'.
(a) After TD 93/35, insert:
Income tax: capital gains: what are the CGT consequences where an asset, which was acquired by a legal personal representative (LPR) after the death of the deceased, passes to a remainderman on the death of a life tenant? (now withdrawn)
(b) After 'time of death', insert a comma.
(c) After 'as follows:', insert new footnote 20A:
20A TD 93/35 was withdrawn with effect from 28 September 2005. The issue covered in TD 93/35 was dealt with in Draft Taxation Ruling TR 2005/D14 Income tax: capital gains tax: consequences of creating, and dealing in, life and remainder interests in property which was finalised by this Ruling.
Omit 'Law Administration Practice Statement'.
In footnote 23, after 'Section references are to', insert 'the'.
Omit 'trustee/remainder'; substitute 'trustee or remainder'.
This Addendum applies from 12 March 2025.
Commissioner of Taxation
12 March 2025
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References
ATO references:
NO 1-10UPILMG