Private ruling: CGT - deceased estate - main residence
Published: August 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is the dwelling considered to be the main residence of Deceased B from the date of Deceased A's death to the date of Deceased B's death? | A1: Yes. | Q2: Is any capital gain or capital loss made on the disposal of the dwelling disregarded? | A2: No. | Q3: Is any capital gain or capital loss made on the disposal of the dwelling disregarded in part? | A3: Yes

Relevant facts and circumstances: You are an administrator of the estate of Deceased A. Deceased A purchased the dwelling after 20 September 1985. Deceased A had a number of children, one of whom had a disability, Deceased B. Deceased A's will stipulated that each child will receive a fraction of the Estate, but due to Deceased B's disability, their share was to remain in the Estate. The other beneficiaries received their full entitlement. Deceased B's entitlement, which included the dwelling, remained in the Estate. The dwelling was Deceased A's main residence until the date of their death. Deceased B lived in the dwelling from the date of Deceased A's death until the date of their death. The property was sold during the 2011-12 income year. You have supplied the following documents which form part of and should be read in conjunction with this private ruling: · last will and testament of Deceased A · administration of the Estate of Deceased A · death certificate of Deceased B · certificate of title of the dwelling with executors of the Estate of Deceased A shown as proprietors.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195 | Income Tax Assessment Act 1997 Section 118-200 | Income Tax Assessment Act 1997 Section 128-15

Reasons for decision: Summary: As Deceased B lived in the dwelling and did not treat any other dwelling as their main residence the dwelling is considered to be the main residence of Deceased B from the date of Deceased A's death to the date of their death. If the ownership of a deceased person's dwelling passes to you as the trustee of their estate, you may be exempt or partially exempt when a CGT event happens to it. A trustee disregards a capital gain or capital loss made on the disposal of the deceased's main residence if: · the trustees' ownership interest ends within two years of the deceased's death; or · from the deceased's death until it is disposed of, if it was the main residence of one or more of: · the spouse of the deceased immediately before the deceased's death; or · an individual who had a right to occupy the dwelling under the deceased's will; or · the beneficiaries to whom the ownership interest in the dwelling has passed. In your case, your ownership interest did not end within the two years of the Deceased A's date of death, it was not the main residence of an individual who had a right to occupy the dwelling under the Deceased A's will, nor was it the main residence of a beneficiary to whom the ownership interest in the dwelling has passed. While Deceased B did occupy the dwelling and it was their main residence, they did not have a right to occupy the dwelling under the Deceased A's will and the ownership interest in the dwelling remained in the Estate. Therefore, you are not entitled to the main residence exemption. You may get a partial exemption if you owned the dwelling as the trustee of a deceased estate and you are not entitled to a full exemption under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997). In your case, you are entitled to a partial main residence exemption to account for the days where the dwelling was Deceased A's main residence, being the period from when the dwelling was acquired by Deceased A to their date of death. As Deceased B did not have a right to occupy the dwelling, their main residence days, being the period from the date of Deceased A's death to the date of Deceased B's death, are treated as non-main residence days for the purposes of calculating the partial main residence exemption. You calculate the capital gain or capital loss on the dwelling as follows: Capital gain or capital loss x non-main residence days total days The capital gain or capital loss is calculated as the difference between the capital proceeds and the cost base of the dwelling. As ownership never passed to Deceased B, the first element of the cost base is the market value of the dwelling on the date of Deceased A's death. Non-main residence days is: · the sum of the number of days in Deceased A's ownership period when the dwelling was not their main residence; and · the number of days in the period from Deceased A's death until your ownership interest ends when the dwelling was not the main residence of an individual who had a right to occupy the dwelling. Total days is the number of days in the period from when Deceased A acquired the dwelling until your ownership interest ends.

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