Private ruling: capital gains tax
Published: April 2015
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Is any capital gain made on disposal of the property disregarded under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes.

Relevant facts and circumstances: The deceased passed away several years ago. The deceased owned a property which was always their main residence until they began residing at an aged care facility. The deceased had no other properties and continued to treat it as their main residence. The deceased's will allowed a beneficiary to live in the property until they found alternative accommodation. The executor allowed the beneficiary to reside at the property for a total of X years because of their medical condition. The family found the beneficiary alternative accommodation and the property was placed on the market for sale. The home was sold.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195

Reasons for decision: Summary: A capital gain or capital loss is disregarded under section 118-195 of the ITAA 1997 where a capital gains tax (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 and certain other conditions are satisfied. For the dwelling in question 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. ATO ID 2003/109 states that: An individual would be considered to occupy a dwelling under the deceased's will if it was in accordance with the terms of the will. This would also be the case if it was in pursuance of the will or under the authority of the will (see Evans v. Friemann (1981) 53 FLR 229 at 238). In this case, the will gave a specific beneficiary the right to occupy the dwelling until they found alternate accommodation. As the beneficiary had a right to occupy the dwelling, the capital gain made on the disposal of the property can be disregarded in full.