Private ruling: Deceased estates - main residence exemption
Date of advice: 26 September 2018
Published: November 2018
Ruling period: Year ended 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you able to disregard any capital gain you make on the disposal of the property you inherited due to the application of section 118-195 of the Income Tax Assessment Act 1997 ? | A1: Yes

Relevant facts and circumstances: A taxpayer passed away. In the taxpayers will, they left the following to their beneficiaries: ● A life interest in their main residence (the Property) to their spouse. ● The remainder interest in the Property to their children in equal portions. The Property was purchased prior to 20 September 1985. The taxpayer’s spouse resided in the Property until the 2017 financial year when they moved in with their child. The Property was not used for income producing purposes and remained the taxpayer’s spouse’s main residence. The Property was sold in the 2018 financial year.

Relevant legislative provisions: Section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997)

Reasons for decision: Summary: An individual can disregard a capital gain or loss that they make from a CGT event that happens in relation to a dwelling or their ownership interest in that dwelling if the following conditions are met: ● the interest is passed to them as a beneficiary in a deceased estate; ● either the deceased acquired the property prior to 20 September 1985 or the property was the deceased’s main residence just before their death and was not used for producing income; and, ● either your ownership interest ends within 2 years of the deceased’s death or the dwelling was, from the deceased’s death until the beneficiaries ownership ends, the main residence of one or more of: ● the spouse of the deceased immediately before the death; or, ● an individual who has a right to occupy the dwelling under the deceased’s will; or, ● the individual to whom the ownership interest passed as a beneficiary. As the ownership interest in the property was received as part of a deceased estate, the property was the main residence of the deceased, and the property was the main residence of an individual who had a right to occupy the dwelling under the deceased’s will any capital gain or loss will be disregarded.