Private ruling: Capital gains tax - deceased estate - main residence - right to occupy
Date of advice: 12 November 2015
Published: January 2016
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Can you disregard the capital gain from the sale of the dwelling under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195. | Income Tax Assessment Act 1997 Section 118-200. | Income Tax Assessment Act 1997 Subsection 128-15(2) | Income Tax Assessment Act 1997 Subsection 128-15(4) | Income Tax Assessment Act 1997 Section 115-25.

Reasons for decision: Summary: Section 118-195 of the Income Tax Assessment Act 1997 relevantly provides that a capital gain you make from the disposal of an interest in a dwelling is disregarded if: • The interest passed to you as a beneficiary in a deceased estate, and • The deceased acquired the ownership interest on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death. In your case, your interest in the dwelling passed to you as a beneficiary in your parent's estate. They acquired their ownership interest in the dwelling on the date your grandparent died (ie after 20 September 1985) but the dwelling was not your parent's main residence just before they died. Accordingly, the capital gain you make will not be disregarded. However, as you held your interest in the dwelling for more than 12 months you are eligible to apply the 50 per cent individual discount to any capital gain you make. Please note that the circumstances surrounding the statutory declaration made by your grandparent, and whether 'B' had a right to occupy the dwelling under your grandparent's will, are not relevant to how the law applies to your situation. This is because you inherited your interest in the dwelling from your parent, and as the dwelling was not your parent's main residence just before they died, you do not satisfy the requirements of section 118-195.

Relevant facts: The arrangement that is subject of the private ruling is described below. This description is based on the following documents. These documents form part of, and are to be read with this description. The relevant documents are: | Your grandparent acquired a dwelling prior to 19 September 1985. | Your grandparent died a number of years later. | The dwelling had been your grandparent's main residence until they died. | Your grandparent had three children, (A), (B) and your parent, (C). | 'B' resided in the dwelling with your grandparent and was their carer prior to your grandparent's death. | Your grandparent had prepared a statutory declaration stating their wishes. | Under your grandparent's will, which cannot now be located, their three children received a one-third interest in the dwelling. | Your parent died in 20XX and their one-third interest passed to their two children, (D) and you, who thereby each acquired a one-sixth interest in the dwelling. | 'B' resided in the dwelling until 20YY when they moved into an aged care facility. | The dwelling was valued in at the date of death in the range of $X to $Y. | The dwelling has been sold in 20ZZ for $Z with settlement occurring a short time later. | The dwelling has not been used to produce assessable income. | 'B' did not have another main residence.