Private ruling: Capital gains tax primary place of residence exemption for deceased estate
Published: March 2021
Ruling period: Income year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can the Trustee of the Estate disregard any capital gain arising from the disposal of the Property in accordance with section 118-210 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes

Relevant facts and circumstances: Person A died, leaving a Will. The Will was provided to the Commissioner and forms part of the facts of this Ruling. The Will contains a clause that provides for the residuary of the Estate to be used for the benefit of Person A's child, Person B, and also gives the Trustee authority to make investments as authorised by the relevant State's Trustee Act. Person A's residential home at the time of their death was sold by the Trustee, and person B sold their home around the same time. The Trustee and Person B used the respective proceeds of those sales to purchase the Property, as tenants in common in equal shares, each contributing 50% of the purchase price of the Property. The Property was purchased around MMYY, with settlement taking place on or about DDMMYY. The Property was Person B's main residence from the time it was purchased. Person B has been the only person to reside in that property. Person B has not paid any rent to the Trustee. In MMYY, Person B moved out of the Property into an aged care home. The Property was cleared of Person B's possessions and prepared for sale. The Property was sold on DDMMYY and settlement occurred on DDMMYY. Person B and the Trustee of the Estate each received 50% of the sale proceeds in accordance with their ownership.


Reasons for decision: Summary: Section 118-210 of the ITAA 1997 provides that where a dwelling is acquired by a trustee in accordance with the will of the deceased for occupation by an individual, provided that the dwelling was the individuals main residence for the entire period, any capital gain or loss resulting from the disposal of the dwelling is disregarded. In order for a dwelling to be acquired under a will there needs to be a connection between the will and the acquisition of the ownership interest. In Taxation Determination TD 1999/74 Income tax: capital gains: in what circumstances does a trustee of a deceased estate acquire an ownership interest in a dwelling 'under the deceased's will' for the purposes of subsection 118-210(1) of the Income Tax Assessment Act 1997? the Commissioner has stated that the term 'under the will' does not require that the connection under the will be a strict one, so long as it is in accordance with the terms, in pursuance of and under the authority of the will. A trustee may also have general rights under the relevant State Trustee Act to purchase a dwelling for the occupation by an individual. In this case, the relevant State's Trustee Act provides the trustee power to purchase a dwelling house as residence for a beneficiary. The authority for this action is the relevant State Trustee Act and not the deceased's will. In this situation, whilst the purchase of the Property was not specifically provided for in Person A's Will, it is in keeping with the intent of the will, being that the residuary of the Estate be used for Person B's benefit. Further, a clause widens the Trustee's powers to include the making of investments that are allowed for under the relevant State's Trustee Act which specifically allows for such a purchase for the use of the beneficiary. Person B lived in the house since it was acquired on or about DDMMYY until they moved into aged care. Person B has not had any other main residence in this time. The house was Person B's main residence. The sale of the house occurred after Person B moved out and it was prepared for sale. Consequently, in these particular circumstances, section 118-210 of the ITAA 1997 will be taken to apply to sale of the Property as it was partly purchased by the Trustee under Person A's Will. The purchase of the property is within the scope of duties allowed by the Trustee. Therefore, the Trustee will be able to disregard any capital gain or loss made on the Trustee's share of the sale of the Property.

Relevant legislative provision: Income Tax Assessment Act 1997 Section 118-210