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Tax Office – Administrative treatment for proposed changes to taxing of deceased estates Posted on October 9, 2018


What are the proposed changes?

In the 2011-12 Federal Budget, the former government announced an intention to legislate the current Tax Office practice of allowing a testamentary trust to distribute an asset of a deceased person without a capital gains tax taxing point occurring.

As part of the 2-12-13 Federal Budget, the government announced it will make a series of minor amendments to the 2011-12 Budget measure to ensure the proper functioning of the CGT provisions for deceased estates.

These changes include:

  • reducing compliance costs by ensuring the deceased’s tax return does not need to be amended as the taxing point will be recognised by the entity transferring the asset.

  • modifying application dates for minor changes announced in the 2011-12 Federal Budget, and

  • broadening the scope of the integrity provisions to also apply to assets passing via survivorship.

What is the application date for these proposed changes?
These changes are proposed to apply to CGT events happening on or after the day the legislation receives Royal Assent, except for the roll-over that will apply where an intended beneficiary dies before administration is completed. This change will be backdated to apply to CGT events that happen in the 2006-07 and later income years.

Tax Office’s administrative treatment

The Tax Office indicates that it will accept tax returns as lodged during the period up until the proposed law change is passed by Parliament. Past year assessments will not be reviewed until the outcome of the proposed amendment is known.

After the new law is enacted, impacted taxpayers will need to review their positions in previous income years:

  • taxpayers who choose roll-over relief which accords with the changes: do not need to do anything more

  • taxpayers who did not choose roll-over relief: can seek amendments and if a reductions in liability results, interest on over payment will be paid

  • taxpayers who choose to anticipate the roll-over relief, but find that this does not accord with the changes: will need to seek amendments.

Shortfall penalties and interest?

In these cases, the Tax Office states that no tax shortfall penalties will be applied and any interest accrued will be remitted to the base interest rate up to the date of enactment of the law change.

In addition, any interest in excess of the base rate accruing after the date of enactment will be remitted where taxpayers actively seek to amend assessments within a reasonable timeframe after enactment.

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