Private ruling: Exemption for capital gains tax
Date of advice: 19 October 2015
Published: November 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Is the trustee of the deceased estate entitled to an exemption for CGT on the sale of the property in relation to both half shares in the property acquired by the deceased at different times? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 118-195(1) | Income Tax Assessment Act 1997 Subsection 118-145

Reasons for decision: Summary: Subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) allows a trustee or beneficiary of a deceased estate to disregard a capital gain or loss from a dwelling if: • the property was acquired by the deceased before 20 September 1985; or the property was acquired by the deceased on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death and was not then being used for the purpose of producing assessable income; and • your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). In the present case the deceased acquired a half share in the dwelling prior to 20 September 1985 and lived in the dwelling with their relative until they moved into a nursing home. The relative continued to reside in the dwelling. Subsequently the deceased acquired the relative's half share of the dwelling. The dwelling was sold by the trustee of the deceased's estate within 2 years of the deceased's death. Since being acquired by the deceased, the dwelling has never been used to produce income. It is clear that the requirements for CGT exemption under subsection 118-195(1) of the ITAA 1997 are met with respect to the deceased's original half share in the dwelling. The treatment of the half share the deceased acquired from their relative requires further consideration. Under section 118-145 of the ITAA 1997 a dwelling can be treated as a taxpayer's main residence even after it ceases to be their main residence. This treatment applies indefinitely if the property is not used to produce income. Although the deceased was not physically residing in the dwelling at the time the second half share was acquired, as the dwelling had previously been the deceased's main residence it is accepted that due to section 118-145 of the ITAA 1997 the main residence requirement under subsection 118-195(1) of the ITAA 1997 is met with respect to the second half share. Consequently, the second half share also qualifies for CGT exemption under subsection 118-195(1) of the ITAA 1997.

Relevant facts: The deceased acquired a property with a relative prior to 20 September 1985. | Before moving into a nursing home the deceased resided at the property with their relative. | The relative continued to reside at the property. | After 20 September 1985 the deceased acquired the relative's half share of the property. | The property was sold by the trustee of the deceased's estate within 2 years of the deceased's death.