Private ruling: Capital gains tax - deceased estate
Published: July 2013
Ruling period: Year ended 30 June 2010
Date scheme commenced: 1 July 200X

Ruling: Q1: Can you disregard the capital gain from the disposal of property under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: The deceased died. The deceased and their spouse used the property as their main residence until the deceased's death. The spouse continued to use the property as their main residence until their death. The property was never used to produce assessable income. The executors of the estate sold the property to a third party after the spouse's death.

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

Reasons for decision: Summary: As per subsection 118-195(1) of the ITAA 1997, a capital gain or capital loss you make from a capital gains tax (CGT) event that happens in relation to a dwelling or your ownership interest in it is disregarded if: (a) 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 (b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied. | Detailed Reasoning - And also one of these items: 1 the deceased *acquired the *ownership interest on or after 20 September 1985 and the *dwelling was the deceased's main residence just before the deceased's death and was not then being used for the *purpose of producing assessable income your *ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner ........... 2 the deceased *acquired the *ownership interest before 20 September 1985 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 this case, the deceased resided in the property with their spouse. The property was not used to produce assessable income and it was their main residence just before their death. The property remained the main residence of the deceased's spouse until their subsequent death. Therefore as the property continued to be the main residence of the spouse of the deceased, you have satisfied the conditions contained in section 118-195(1) of the ITAA 1997. Accordingly the capital gain from the disposal of the deceased's property can be disregard.