Private ruling: CGT event
Date of advice: 4 November 2025
Published: 22 December 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the Trustee for the Individual's Estate entitled to claim a capital loss as a result of either CGT event A1 or CGT event C2 happening when the Individual has been removed from the registered lease for the Dwelling? | A1: No

Relevant facts and circumstances: 1. In 20XX, the Individual and the Individual's spouse signed an Application to Reside at a unit (the Dwelling) of a retirement village (The Village). The application was accepted by the Scheme Operator (the Operator). 2. A lease agreement was subsequently entered into between the 2 parties with a commencement date of the Lease in 20XX with the Individual and the Individual's spouse named as joint tenants. The expiry date of the Lease was in 99 years, or the death of the surviving lessee. [1] 3. Clause XX of the Lease Schedule stipulates that an Ingoing Contribution was to be paid by the lessee prior to the commencement date. The Ingoing Contribution paid was $XXX,XXX. 4. The spouse died prior to the Individual, making the Individual the surviving lessee. 5. The Individual died in 20XX. 6. The Termination Date of the Lease is defined at clause XX to mean: ...the date this Lease is validly terminated by either party in accordance with this Lease or this Act. 7. Clause XX of the Lease Schedule states: This Lease terminates on the day you die. If there is more than one of you then this Lease terminates when the last of you dies. In these circumstances the Termination Date is the date of death. 8. Clause XX of the Lease Schedule states: What happens when this Lease is terminated When this Lease is terminated, then unless the Act provides otherwise: ... (e) we must repay you your Ingoing Contribution and your share of any Capital Gain and you must pay us your Exit Fee, any Capital Loss and other payments you owe us (see clause XX) after your Unit has been leased to a new Resident. 9. 'Capital Gain' is defined as the amount by which the Resale Price exceeds the Ingoing Contribution, while 'Capital Loss' is defined as the amount by which the Ingoing Contribution exceeds the Resale Price. [2] 10. 'Resale Price' is defined as the ingoing contribution payable to the Operator by a new resident under a lease in respect of the unit. [3] 11. The Resale Price payable by the new resident was $X,XXX,XXX. 12. Clause XX of the Lease Schedule sets out the payments to be made following termination. It states: XX What you must pay to us When we repay you your Ingoing Contribution, you must pay us: (a) the Exit Fee (calculated as shown in the Information Table); ... These payments must be made when we repay you your Ingoing Contribution. We may set off any amounts payable by you under this clause against the amount that we must repay you under clause XX or any amount we must repay you under clause XX. 13. Clause XX of the Lease Schedule states the Information Table shows how the Exit Fee is calculated. The Information Table shows the Exit Fee is an amount calculated as a percentage of the Ingoing Contribution, with the percentage differing depending on the duration of residence. 14. Clause XX states: Capital Gain or Capital Loss On or before the Exit Entitlement Date: (a) we must repay you 50% of any Capital Gain; and (b) you must pay us 100% of any Capital Loss. 15. In accordance with clause XX of the Lease Schedule, the amount of Capital Gain payable to the Estate of the Individual was $XX,XXX. 16. There were other fees and charges that were payable at settlement of the Lease. 17. The outcome of the settlement of the Lease was a claimed capital loss. 18. The Individual owned a separate property which had been used to derive rental income while the Individual resided at the Village. The Individual intended to claim this property as a main residence under the absence rule at subsection 118-145(2) of the Income Tax Assessment Act 1997 (ITAA 1997). The property was disposed of by the Trustee of the Individual's Estate (the Trustee) within 2 years of the Individual's death. Information provided 19. You have provided information in a number of documents. 20. We have referred to the relevant information within these documents in applying the relevant tests to your circumstances.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 subsection 102-25(1) | Income Tax Assessment Act 1997 subsection 104-10(1) | Income Tax Assessment Act 1997 subsection 104-10(4) | Income Tax Assessment Act 1997 paragraph 104-25(1)(c) | Income Tax Assessment Act 1997 subsection 104-25(3) | Income Tax Assessment Act 1997 subsection 108-5(1) | Income Tax Assessment Act 1997 paragraph 108-5(1)(a) | Income Tax Assessment Act 1997 paragraph 108-5(1)(b) | Income Tax Assessment Act 1997 section 118-40 | Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-130 | Income Tax Assessment Act 1997 subparagraph 118-130(1)(c)(ii) | Income Tax Assessment Act 1997 subsection 118-145(2) | Income Tax Assessment Act 1997 subsection 118-145(4)

Reasons for decision: Summary: No.The relevant CGT asset is the right to occupy the Dwelling. Ownership of the right to occupy the Dwelling expired on the Termination Date, which was the date of death of the Individual. Since CGT event C2 happens when a right to occupy expires, the capital loss made is to be returned by the Trustee in the Individual's final individual income tax return, not in the Estate income tax return. | Detailed Reasoning - Detailed Reasoning: 1. You make a capital gain or capital loss if a CGT event happens to a CGT asset. [4] Property, and legal or equitable rights, are considered to be CGT assets. [5] 2. CGT event A1 happens if you dispose of your ownership interest in a CGT asset [6] . You make a capital loss if the capital proceeds are less than the asset's reduced cost base. [7] 3. CGT event C2 happens when your ownership of an intangible CGT asset, such as a legal or equitable right, expires. [8] You make a capital loss if the capital proceeds are less than the asset's reduced cost base. [9] | Detailed Reasoning - CGT event A1: 4. The Individual and the Individual's spouse commenced the Lease in 20XX. You have stated [10] that this amounts to an ownership interest in accordance with section 118-130, which relevantly states: 118-130(1) You have an ownership interest in land or a dwelling if: (c) for a flat or home unit - you have: (ii) a licence or right to occupy it 5. You contend CGT event A1 subsequently happened when a change of ownership occurred, being when the Individual was removed from the Lease in 20XX with the Lease having devolved to the executor of the Individual's estate. [11] 6. The 'right to occupy' referred to at subparagraph 118-130(1)(c)(ii) satisfies the meaning of 'ownership interest' for the purposes of the main residence exemption at section 118-110 and is treated as an ownership interest for this purpose . However, the Individual also owned a separate property which had been used to derive rental income while the Individual resided at The Village. The Individual intended to claim this property as a main residence under the absence rule at subsection 118-145(2). As a consequence, the Individual would not have been able to treat the Dwelling as a main residence concurrently with the other property. [12] Therefore, section 118-110 does not have application in this instance, meaning an ownership interest does not arise under section 118-130 from the right to occupy the Dwelling. 7. Moreover, when the Individual and the Individual's spouse commenced the Lease, the Operator remained the legal owner of the Dwelling, as it is in the business of leasing units/accommodation in The Village. While a lease may grant a right to occupy, it does not equate to legal or beneficial ownership of the property itself. It is merely a leasehold interest. Therefore, an ownership interest other than that described at section 118-130 was not created when the Lease commenced in 20XX. 8. Consequently, there was no disposal of an ownership interest in a CGT asset at the time of, or subsequent to, the Individual's death. As a result, CGT event A1 did not happen when the Individual was removed from the Lease. CGT event C2 9. The Individual was granted a right to occupy the Dwelling when the Individual and the Individual's spouse commenced the Lease in 20XX. This right is an intangible asset and is a CGT asset under subsection 108-5(1). 10. Clause XX of the Lease Schedule states the 'Lease terminates on the day you die ....In these circumstances the Termination Date is the date of death.' Clause XX defines Termination Date as meaning'the date this Lease is validly terminated by either party in accordance with the Lease or this Act . ' 11. In addition, clause 55 of Division 4 (Terminating right to reside) in Part 3 of the Queensland Retirement Villages Act 1999 states: | Detailed Reasoning - Right to reside in a retirement village terminates automatically on resident's death: A right to reside in an accommodation unit in a retirement village held by a resident terminates on the death of the resident. 12. As the Lease expired on the Termination Date, being the Individual's death in 20XX, the right to occupy the Dwelling, being an intangible asset, also expired. Since ownership of an intangible CGT asset expired, CGT event C2 happened on this date in accordance with paragraph 104-25(1)(c). 13. It is your view a CGT event happened when the Individual was removed from the Lease in 20XX, with the Lease having devolved to the Executor of the Individual's estate. As authority for this view, you stated [13] : Clause XX Rights are not affected by Termination states many clauses of the lease are not affected by Clause XX Termination on Death. Specifically, the "rights and obligations of the parties under clauses X, XX & XX to XX". 14. Clauses X, XX and XX to XX outline ongoing obligations such as General Services Charges, maintenance fees and GST. However, these are part of the estate's administration and settlement, not the CGT asset itself, and do not alter the termination of the Lease which occurred in 20XX by virtue of clause XX. That is, the timing of CGT event C2 depends on when the leasehold interest / right to reside ends, not when all financial and administrative matters - such as removing the deceased's name from the Lease - are settled. 15. Further, there is nothing in the Lease Schedule that suggests a transfer to the Trustee. In fact, paragraphs (X) and (X) of clause XX specifically prevent a resident from assigning any interest in their unit or granting a lease or other tenancy or occupation rights over or give any other person possession of all or part of their unit without consent. Nothing in clauses indicates that the Lease is transferred or devolves to the Trustee. 16. As per clause XX of the Lease Schedule, and in accordance with clause 55 of Division 4 (Terminating right to reside) in Part 3 of the Queensland Retirement Villages Act 1999 ,the Lease expired on the Termination Date, being the Individual's death in 20XX. As the Lease expired at this time, ownership of the right to occupy, being an intangible asset, also expired. Since ownership of an intangible CGT asset expired, CGT event C2 happened in 20XX in accordance with paragraph 104-25(1)(c). Moreover, CGT event C2 is considered the more specific CGT event to occur for the facts presented. [14] | Detailed Reasoning - Conclusion: 17. Settlement of the Lease occurred in 20XX. In accordance with clauses XX and XX of the Lease Schedule, the amount payable to the Estate of the Individual was adjusted to account for the Exit Fees and Capital Gain. The result was a capital loss. 18. Generally, a capital loss made by a lessee on the expiry of a lease that was not used solely or mainly for the purpose of producing assessable income is disregarded, except ones granted for 99 years or more. [15] Since the Lease was a 99-year lease, the capital loss is not disregarded. 19. As CGT event C2 happened in 20XX, the capital loss is returned in the Individual's final income tax return. Consequently, the Trustee for the Individual's Estate is not entitled to utilise any of the capital loss as it belongs to the deceased individual. [1] Form 7 of the Registered Lease [2] Clause XX of the Lease Schedule [3] Clause XX of the Lease Schedule [4] Section 102-20 [5] Paragraphs 108-5(1)(a) and (b) [6] Subsection 104-10(1) [7] Subsection 104-10(4) [8] Paragraph 104-25(1)(c) [9] Subsection 104-25(3) [10] Email dated 14 October 2025 [11] Email dated 23 October 2025 [12] Subsection 118-145(4) [13] Email dated 23 October 2025 [14] Subsection 102-25(1) [15] Section 118-40

Reasons for decision: All legislative references are to the ITAA 1997 unless otherwise stated.