In a ruling on 4 July 2024, the Federal Court has upheld an internal decision of the Commissioner of Taxation regarding the treatment of capital gains tax in respect of trustees of bankrupt estates.

In the case of Robson as trustee for the bankrupt estate of Lanning v Commissioner of Taxation [2024] FCA 720, Mr Robson, in his capacity as trustee for the bankrupt estate of Mr Lanning, sold two properties of the estate which resulted in capital gain.

The trustee lodged an application for private ruling by the Commissioner of Taxation in respect of his liability for the payment of capital gains tax in relation to the properties sold. The Commissioner determined that the trustee was indeed liable for the capital gains tax.

Appealing the Commissioner’s decision, the Trustee argued that he was not liable for the capital gains tax payable for property sales made in his capacity as trustee for Mr Lanning’s estate. This argument was framed as:

That there is no fiduciary relationship between a trustee in bankruptcy and the bankrupt, such that the Trustee was not acting in a representative capacity.
That the properties were not owned by the Trustee at the time, but merely vested in him, meaning the disposal of the properties at the point of sale should be considered to be that of the bankrupt and not the Trustee.

The Federal Court rejected both of these arguments, and has confirmed that trustees in bankruptcy are liable for capital gains tax for all relevant sales of property made in their capacity as Trustee of the bankrupt.

Please contact if you have any queries.

Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E: ahill@sladen.com.au
Neil Brydges
Principal | Accredited Specialist in Tax Law
M +61 407 821 157 | T +61 3 9611 0176
E: nbrydges@sladen.com.au