Private ruling: Capital gains tax - main residence exemption
Date of advice: 18 May 2023
Published: 3 July 2023
Ruling period: Income year ending 30 June 20XX.
Date scheme commenced: 1 July 20XX.

Ruling: Q1: Is Lot 1 entitled to the same main residence exemption as applied to Lot 2? | A1: Yes. In accordance with the principles contained in Taxation Determination TD 1999/68 the sale of Lot 2 and Lot 1 are viewed as occurring in the same event and section 118-165 of the Income Tax Assessment Act 1997 will not apply. Therefore, any eligibility to the main residence exemption in relation to Lot 2 will also apply to Lot 1.

Relevant facts and circumstances: Person A and Person B purchased two lots (the Lots) as joint tenants after 20 September 1985 as follows: • Lot 1, being vacant land on which several trees and bush were located, including some large mature ornamental trees, such as mature Radiata Pines located along the western boundary to provide windbreaks; and • Lot 2, being land with a house (the House) and other structures located on it. There was no boundary fence between the Lots with Lot 1 being used as a backyard, and both being used together as parkland with mature trees. Local Council issued combined annual rates notice for the Lots. Person A and Person B resided at the Lots until Person A passed away, and their interests in the Lots were transferred to Person B. Person B went into respite care at an aged care facility. Person B became a permanent resident of the aged care facility in XX/XX/20XX. Person B had not undertaken any improvements in relation to the Lots other than undertaking any necessary maintenance and neither lot was used for any rental and/or business purposes. Person B passed away on XX/XX/20XX. Person B had made bequests to various charities and legal proceedings had commenced in relation to several parties contesting the deceased estate from XX/20XX, delaying probate being granted until the court proceedings were finalised. The final mediation in relation to the court proceedings occurred on XX/20XX and Court Orders were issued on XX/20XX in which the Executor was appointed as the trustee of the Deceased Estate (the Trustee). Probate for the Deceased estate was granted to the Trustee by the Court on XX/XX/20XX. The Trustee made the choice under section 118-145 of the Income Tax Assessment Act 1997 to continue to treat the Lot's as Person B's main residence for the period after they moved into the nursing home until they passed away. The Lots were put on the market on XX/XX/20XX and sold to the same purchaser on the same day, being XX/XX/20XX.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Section 118-120 | Income Tax Assessment Act 1997 Section 118-165