Private ruling: CGT - sale of dwelling from deceased estate
Published: June 2012
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Questions and answers | Are the beneficiaries of the will entitled to a full exemption from CGT upon the sale of the dwelling? | No. | Are the beneficiaries of the will entitled to a partial exemption from CGT upon the sale of the dwelling? | Yes.

Relevant facts and circumstances: The deceased purchased the dwelling prior to 20 September 1985. The dwelling was the deceased's main residence. The deceased died in 200X. The deceased's spouse was granted a life interest in the dwelling under the terms of the deceased's will. The deceased's spouse lived in the dwelling. The deceased's spouse died in 20XX. The property has never been used for income producing purposes. The beneficiaries now intend to sell the dwelling.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 128-15. | Income Tax Assessment Act 1997 Section 118-195. | Income Tax Assessment Act 1997 Section 118-200. | Income Tax Assessment Act 1997 Section 118-210.

Reasons for decision: Summary: Under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) There is a full CGT exemption for the beneficiaries to whom such a dwelling passes for any capital gain that is made from a relevant CGT event happening if: · the beneficiaries' ownership interest ends within two years of the deceased's death, or · from the time of the deceased's death until the beneficiaries' ownership interest ends, the dwelling was the main residence of one or more of the following: · the spouse of the deceased immediately before death (except a spouse living permanently and separately apart from the deceased) · an individual who had a right to occupy the dwelling under the deceased's will, or · if the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary - that individual. The Commissioner does not have any discretion to extend the two-year period. In your case, the full exemption is not available to the beneficiaries because: · the beneficiaries' ownership interest did not end within two years of the deceased's death, and · the beneficiaries' ownership interest did not end at the time of the deceased's spouse's death, and · since the deceased's spouse's death, the dwelling has not been the main residence of an individual who had a right to occupy the dwelling under the deceased's will. Although the beneficiaries are not entitled to a full exemption, a partial exemption is available under section 118-200 of the ITAA 1997. In applying the partial exemption, the amount of the capital gain is calculated as follows: Capital gain x Non-main residence days Total days where: · capital gain is the capital gain or loss the beneficiaries would have made from the CGT event apart from the main residence exemption; · non-main residence days is the number of days in the period from the deceased's death until the beneficiaries' ownership interest ends when the dwelling was not the main residence of the deceased's spouse, and · total days is the number of days in the period from the deceased's death until the beneficiaries' ownership interest ends. Further information to consider For the purposes of calculating the capital gain: The acquisition date of the property is the date that the beneficiaries acquired the dwelling, i.e. the date that the deceased died (section 118-210 of the ITAA 1997). The cost base of the dwelling is the market value of the asset on the day of the deceased's death (section 128-15 of the ITAA 1997).

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