Private ruling: Capital gains tax
Date of advice: 17 February 2016
Published: April 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 1 July 2015

Ruling: Questions and answers | 1. Will you be entitled to fully disregard any capital gain you make from the disposal of the dwelling should you continue to occupy the dwelling as your main residence up until the time you dispose of it? | Yes. | 2. Will you be entitled to fully disregard any capital gain you make from the disposal of the dwelling should you obtain a development application for the dwelling? | Yes. | 3. Will you be entitled to fully disregard the amount of any capital gain you make from the disposal of the property should the dwelling be demolished? | No.

Relevant facts and circumstances: You lived with and cared for one of your parents in the dwelling they owned for many years. Your parent acquired their ownership interest in the dwelling before 20 September 1985 and the dwelling was their main residence. Your parent moved into a nursing home and passed away some months later. Your parent left the dwelling solely to you in their will. You continued to live in the dwelling following your parent's admission to the nursing home and will continue, to live in the dwelling, possibly for another 12 months. The dwelling is your main residence and has not been used to produce rental income. You intend to submit a development application for demolition of the dwelling and the construction of new dwellings on the land. You own another dwelling that has always been rented out.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 section 118-200

Reasons for decision: Summary: A capital gain or capital loss may be disregarded under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) if you dispose of a dwelling, or your ownership interest in it, and it passed to you as an individual beneficiary of a deceased estate or you owned it as the trustee of a deceased estate. For a dwelling acquired by the deceased before 20 September 1985, 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. 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 your case, the dwelling passed to you when the deceased passed away and it has been your main residence from the date of the deceased's death. Consequently, regardless of whether you dispose of the dwelling within two years of the date of the deceased's death, you will still be able to disregard any capital gain you make from the disposal of the dwelling as the disposal will be effected by you in your capacity as beneficiary of the estate. The exemption will be available for as long as you continue to occupy the dwelling as your main residence. This will be so even if you obtain a development application in relation to the dwelling and land because there will be no change in your occupancy of the dwelling. However, should the dwelling be demolished prior to you disposing of it, the exemption provided by section 118-195 will no longer be available as the dwelling will not be your main residence up until the time your ownership interest ends. In the latter situation, you will be eligible for the partial exemption for dwellings acquired from deceased estates that is available under section 118-200 of the ITAA 1997.