Private ruling: Capital gains tax
Date of advice: 27 April 2017
Published: September 2017
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: If the property is sold within two years of the deceased's death, will you be liable for capital gains tax on the disposal? | A1: No.

Relevant facts and circumstances: The deceased passed away. The property was the deceased's main residence at the time of their death. The deceased acquired the property prior to 20 September 1985. The property was transferred to you. You are going to apply for development approval with the local council. You plan to then sell the property following the approval of the development application, within two years of the deceased's death You will not undertake any land works on the property, or issue separate titles.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 108-5(1) and | Income Tax Assessment Act 1997 Section 118-195(1).

Reasons for decision: Summary: Subsection 108-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines a CGT asset as any kind of property, or a legal or equitable right that is not property. A CGT event will happen at the time of disposal of the CGT asset. Subsection 118-195(1) of the ITAA 1997 states that if you are an individual who owns a dwelling in a capacity as trustee of a deceased estate, then you are exempt from tax on any capital gain made on the disposal of the property if: ● The property was acquired by the deceased before 20 September 1985; and ● your ownership interest ends within two years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). In your case, you are applying to gain development approval on the property before selling it. You are not considered to be creating a new CGT asset by doing this. You are increasing the potential value of the property for the right buyer, like renovating a house so that it will appeal to more buyers. If the property is sold within two years of the deceased's death, subsection 118-195(1) of the ITAA 1997 will apply to disregard the capital gain made on the property.