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

Ruling: Question and answer | Can you disregard any capital gain or capital loss made on the sale of the dwelling? | Yes.

Relevant facts and circumstances: The deceased died a number of years ago. The deceased purchased the dwelling a number of years ago and lived in it as their main residence from that time, until their death. Since the deceased's death, the dwelling has never been used for income producing purposes. The dwelling was placed on the market more than two years after the deceased's died. The dwelling was on the market for a considerable time. There were difficulties and complexities arising in the context of the estate. One of the beneficiaries of the estate was a minor at the time of the deceased's death, after this time, was then able to indicate a preference whether to retain or sell the dwelling, with a decision being taken to sell the property within months of them coming of age. The eventual sale price was significantly less than the value placed on the dwelling by the government valuation. After deduction of sale costs, the net proceeds were significantly less than that of the assessed value of the dwelling.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 118-195(1).

Reasons for decision: Summary: Subsection 118-195(1) of the Income Tax Assessment Act 1997 (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 acquired by the deceased after 20 September 1985 if: · the property was the deceased's main residence just prior to their death · it was not being used to produce assessable income at this time, and · your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed). In the case of the estate, the deceased acquired the dwelling a number of years ago. It was the deceased's main residence just prior to their death and it was not using it to produce assessable income at this time. The trustee's ownership interest in the dwelling did not end within two years of the date of death. The Commissioner will exercise his discretion to extend the 2 year time limit due to complexities and difficulties arising from the estate. Any capital gain or loss made on the sale of the property can be disregarded.

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