Private ruling: CGT deceased estate
Date of advice: 18 October 2018
Published: December 2018
Ruling period: Year ended 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Is the sale of the dwelling eligible for a partial main residence exemption? | A1: Yes

Relevant facts and circumstances: The deceased acquired the dwelling before 20 September 1985. The deceased was the sole registered proprietor of the property. The dwelling was the main residence of the deceased and the spouse from the time of acquisition. The deceased died intestate. Letters of Administration was granted to the spouse; however the estate was not fully administered. The spouse continued to live in the dwelling as their main residence until the spouse moved into a nursing home. The spouse died. Following a number of other deaths in the family the dwelling was subsequently sold, with settlement occurring sometime after. The dwelling has not been used to produce income.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 128-10 | Income Tax Assessment Act 1997 section 128-15 | Income Tax Assessment Act 1997 section 128-20 | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 section 118-200

Reasons for decision: Summary: The sale of the dwelling will be subject to partial main residence exemption. The exemption is available for the period the dwelling was, from deceased's death until your ownership interest ends, the main residence of the spouse. | Detailed Reasoning - Detailed reasoning: A capital gain or capital loss is disregarded under section 118-195 of the ITAA 1997 where a CGT event happens to a dwelling if it passed to you as an individual beneficiary of a deceased estate or you owned it as the trustee of the deceased estate. The availability of the exemption is dependent upon: ● who occupied the dwelling after the date of the deceased's death, or ● whether the dwelling was disposed of within two years of the date of the deceased's death. For a dwelling acquired by the deceased, you will be entitled to a full exemption if: ● the dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of the following relevant individuals: ● the spouse of the deceased immediately before death (except a spouse who was living permanently separately and apart from the deceased) ● an individual who had a right to occupy the dwelling under the deceased's will, or ● an individual beneficiary to whom the ownership interest passed and that person disposed of the dwelling in their capacity as beneficiary, or ● your ownership interest ends within two years of the deceased's death. In this case, the dwelling was acquired pre-CGT, and was the deceased’s main residence upon their death. Additionally, the dwelling was not being used to produce assessable income and was the main residence of their spouse until their death. Although the conditions under 118-195 for a full exemption are not met, a partial exemption may apply. | Detailed Reasoning - Partial main residence exemption: Section 118-200 of the ITAA allows for a partial exemption (or no exemption) if: (a) you are an individual and your ownership interest in a dwelling passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and (b) section 118-195 of the ITAA 1997 does not apply. You calculate your capital gain or capital loss using the formula: Capital gain or capital loss amount x Non-main residence days Total days The capital gain or capital loss is the amount made from the disposal of the dwelling (before applying any main residence exemption). The non-main residence days is the sum of: (a) if the deceased acquired the ownership interest on or after 20 September 1985 – the number of days in the deceased’s ownership period when the dwelling was not the deceased’s main residence; and (b) the number of days in the period from the death until your ownership interest ends when the dwelling was not the main residence of one of the following: ● a person who was the spouse of the deceased (except a spouse who was permanently separated from the deceased) ● an individual who had a right to occupy the dwelling under the deceased’s will, or ● you, as a beneficiary, if you disposed of the dwelling as a beneficiary. Total days is: (a) if the deceased acquired the ownership interest before 20 September 1985, the number of days from the deceased’s death until you disposed of your ownership interest; or (b) if the deceased acquired the ownership interest on or 20 September 1985 – the number of days in the period from the acquisition of the dwelling by the deceased until you disposed of your ownership interest.