Private ruling: Deceased estate and main residence
Date of advice: 16 January 2020
Published: March 2020
Ruling period: Year ended 30 June 2019
Date scheme commenced: 1 July 2018

Ruling: Q1: Can the Trustee disregard any capital gain or loss from the sale of the property under section 118-195 of the Income Tax Assessment Act 1997 ? | A1: Yes. Section 118-195 of the ITAA 1997 operates to disregard any capital gain or loss from the sale of the property as it was sold within two years of the date of death of the deceased and the use of the property for the purpose of producing assessable income is ignored due to the operation of sections 118-45 and 118-190 of the ITAA 1997.

Relevant facts and circumstances: Individual A and their spouse purchased a property prior to 20 September 1985. The dwelling on the property was the main residence of Individual A and their spouse. The property was less than two hectares in size. A 'granny flat' was subsequently built on the property for the benefit of another person and the person was granted a life tenancy for the payment of $X. The local council approved the granny flat without the need for the property to be subdivided. The spouse of Individual A subsequently passed away and their ownership portion passed to Individual A. Ownership of the granny flat reverted to Individual A on the death of the life tenant. A relative of Individual A subsequently moved into the dwelling as Individual A's carer. Individual A subsequently moved out of the dwelling into an aged care facility. Individual A's carer continued to occupy the property and paid rent to satisfy Centrelink requirements in regard to Individual A. Individual A died less than six years after moving into the aged care facility. The trustee of the deceased estate sold the property and the sale transfer was completed within two years of the date of death of Individual A.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-145 | Income Tax Assessment Act 1997 section 118-190 | Income Tax Assessment Act 1997 section 118-195