Private ruling: CGT and deceased estates
Date of advice: 7 March 2024
Published: 6 May 2024
Ruling period: Year ending 30 June 20XX
Date scheme commenced: XXXX

Ruling: Q1: Did the estate of Person A make a capital gain on the sale of the property? | A1: No

Relevant facts and circumstances: Person A and Person B were married. They jointly purchased a property before 20 September 1985 as tenants in common in equal shares. Person B died Person A was named as executor and obtained probate. Person B's will left the residue of their estate (which included their interest in the property) to the Trustees on trust to pay the income to Person A during their lifetime, and after Person A's death to divide the capital in shares between Person B's children as specified by the will. Person A continued to live in the house until they moved into an aged care home. Person A died approximately 6 years after Person B. Person A's will named Person C as executor. Person C obtained probate for the estate. Person C obtained Letters of Administration of Person B's estate trust. The property was sold approximately 8 months after Person A died.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-145 | Income Tax Assessment Act 1997 subsection 118-145(2) | Income Tax Assessment Act 1997 subsection 118-145(4) | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195 (1)

Reasons for decision: Summary: Section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) disregards capital gains and capital losses made from certain CGT events made by a trustee of a deceased estate that happen in relation to a dwelling that was the deceased person's main residence and was not being used to produce assessable income just before they died or was acquired by the deceased before 20 September 1985. Any capital gain or loss on an interest in a dwelling disposed of by a trustee of a deceased estate is fully exempt if at least one of the items in column 2 and at least one of the items in column 3 of the table in subsection 118-195(1) of the ITAA 1997 are satisfied. In the circumstances here, Person A acquired their interest in the property before 20 September 1985 meaning item 2 of column 2 of the table in subsection 118-195(1) of the ITAA 1997 is satisfied. Further, the property was disposed of within two years of Person A's death meaning item 1 of column 3 of the table in subsection 118-195(1) of the ITAA 1997 is satisfied. Therefore, the requirements of section 118-195 of the ITAA 1997 are satisfied and the capital gain on the Person A's interest in the property is disregarded.