Private ruling: Capital gains tax - deceased estate - main residence exemption
Published: July 2014
Ruling period: Year ended 30 June 2014.
Date scheme commenced: 1 July 2013.

Ruling: Q1: Is the estate required to pay tax on the capital gain or loss in relation to the disposal of a dwelling? | A1: No.

Relevant facts and circumstances: You are the executrix of the estate of someone who has passed away. The deceased and the late spouse jointly bought a dwelling as their primary residence. The deceased's spouse passed away and the deceased became the sole owner of the property. The deceased continued to reside in the property then entered into a de facto relationship and moved in with the de facto spouse. You obtained a grant of probate and sold the property at auction. Before the sale, repairs to the property were completed which cost about $X. You also obtained a valuation report which determined the value of the property at $X. The dwelling was disposed of within two years of the deceased's death.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 118-130 | Income Tax Assessment Act 1997 section 118-195

Reasons for decision: Summary: A capital gain or capital loss is disregarded under section 118-195 of the ITAA 1997 where a capital gains tax event happens to a dwelling if it passed to you as an individual beneficiary of a deceased estate or you owned it as the trustee of the deceased estate. The availability of the exemption is dependent upon: • who occupied the dwelling after the date of the deceased's death, or • whether the dwelling was disposed of within two years of the date of the deceased's death. In your case, the dwelling passed to you as the trustee of the deceased's estate and was disposed of within two years of the date of the deceased's death. Therefore, any capital gain or capital loss is disregarded under section 118-195 of the ITAA 1997 and the estate is not required to pay any tax on the disposal of the dwelling.