Private ruling: Capital gains tax
Date of advice: 18 January 2021
Published: March 2021
Ruling period: Year ending 30 June 2021
Date scheme commenced: 1 July 2020

Ruling: Q1: Will you incur Capital Gains Tax (CGT) on the sale of the inherited property? | A1: Yes.

Relevant facts and circumstances: The deceased passed away in 20XX. The property was bequeathed to you and the children of the deceased in the Will. You transferred the property title into your name as the children were all minors. The children continued to live in the property as their main residence. The property was never your main residence as you reside in another property with your immediate family. In 20XX, a number of the children moved out while another has continued to reside in the property until the point of sale. The property was sold in mid 20XX. The property was held solely in your name at the time of sale. The children were not added to the property title.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-195

Reasons for decision: Summary: Under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997), a capital gain or capital loss that you make from CGT event that happens to a dwelling (or your ownership interest in it) is disregarded if you are an individual and the interest passed to you as a beneficiary in a deceased estate or you owned it as the trustee of a deceased estate, and: • The deceased acquired their ownership interest in the dwelling prior to 20 September 1985, or • The deceased acquired their ownership interest on or after 20 September 1985 and the dwelling was their main residence just before they passed away and was not then being used to produce income; And either one of the following conditions also applies: • Your ownership interest ends within two years of the deceased's death, or within a longer period allowed by the Commissioner; or • The dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of: a. The spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or b. An individual who had a right to occupy the dwelling under the deceased's Will; or c. If the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary-that individual. In your circumstances, the second condition was not meet as the property was not sold within two years and was not the main residence of the spouse of the deceased, an individual with the right to reside or the individual who initiated the CGT event, which in this instance will be you. Therefore, as you do not satisfy the required conditions under section 118-195 of the ITAA 1997, you will not be eligible to claim the CGT exemption. Additionally, as you were the only person on the property title, the entire CGT gain will be assessable to you.