Private ruling: CGT liability on disposal of a pre-CGT asset
Date of advice: 8 November 2021
Published: January 2022
Ruling period: Year ended 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Are the trustees liable for capital gains tax on the sale of the dwelling or winding up of the estate? | A1: No. The dwelling passed to the trustees prior to 20 September 1985 and is not assessable for CGT. There were also no major capital improvements or additions to the dwelling which exceeded either the improvement threshold for the income year in which the asset was disposed of; nor 5% of the amount received when the asset was disposed of. Therefore, there were no major capital improvements or additions that could be considered post-CGT assets which could be assessed for CGT either. There are no CGT provisions that will apply to the distribution of the net sale proceeds to wind up the estate such that it would be subject to CGT.

Relevant facts and circumstances: The deceased both acquired a dwelling and passed away prior to 20 September 1985. The dwelling was the main residence of the deceased up until they passed away. Ownership of the dwelling transferred to the trustees of the estate prior to 20 September 1985 and as such, was considered a pre-CGT asset. The deceased's Will was fully executed except for disposal of the deceased's dwelling which the Will granted rights to occupy to the deceased's two surviving siblings. The first sibling passed away in 19xx leaving the remaining sibling still residing in the dwelling. The remaining sibling moved out of the dwelling in xx/20xx. The trustees of the estate engaged an agent to sell the dwelling in xx/20xx. A contract for sale was signed on xx/xx/20xx. The dwelling settled on xx/xx/20xx. No major capital improvements or additions have been made to the property that exceed the improvement threshold for the income year in which the asset was disposed of. No major capital improvements or additions have been made to the property that exceed 5% of the amount received when the asset was disposed of. The trustees plan to wind up the estate by making a final distribution of the cash remaining after the sale of the dwelling, net of costs.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10. | Income Tax Assessment Act 1997 Paragraph 104-10(5)(a). | Income Tax Assessment Act 1997 Subsection 128-15(2).