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

Ruling: Q1: Is the Estate entitled to a partial main residence exemption? | A1: Yes.

Relevant facts and circumstances: The deceased acquired a property prior to 1985. The deceased passed away and under their will, the deceased's spouse was granted a life tenancy. The life tenant lived in the property as their main residence until they passed away. Since this time the property has been vacant and maintained by a number of the beneficiaries. The dwelling has never been used to produce assessable income. The dwelling is currently under offer with a scheduled settlement during the 2014-15 financial year.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195(1) | Income Tax Assessment Act 1997 section 118-200 | Income Tax Assessment Act 1997 subsection 118-200(1) | Income Tax Assessment Act 1997 subsection 118-200(2)

Reasons for decision: Summary: Section 118-200 of the ITAA 1997 deals with the partial main residence exemption for deceased estates. Under subsection 118-200(1) of the ITAA 1997, you get only a partial exemption (or no exemption) if: • 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 • section 118-195 of the ITAA 1997 does not apply. | Detailed Reasoning - Main residence exemption: Under subsection 118-195(1) of the ITAA 1997, a capital gain or capital loss you make from a capital gains tax (CGT) event that happens in relation to a dwelling or your ownership interest in it is disregarded if: (a) you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and (b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied. | Detailed Reasoning - And also one of these items: 1 the deceased acquired the ownership interest on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death and was not then being used for the purpose of producing assessable income your ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner ........... 2 the deceased acquired the ownership interest before 20 September 1985 the dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of: (a) the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or (b) an individual who had a right to occupy the dwelling under the deceased's will; or (c) if the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary - that individual In this case, the conditions set out above have not been satisfied. Therefore section 118-195 of the ITAA 1997 does not apply to allow you to disregard the entire capital gain. However, you will be entitled to a partial main residence exemption in relation to the disposal of the dwelling. | Detailed Reasoning - Working out your capital gain: Subsection 118-200(2) of the ITAA 1997 states that you calculate your capital gain (or loss) using the following formula: CG or CL amount × Non-main residence days Total days CG or CL is the capital gain or capital loss you would have made from the CGT event apart from this Subdivision. In this case the non-main residence days will be the number of days in the period from the death until your ownership interest ends when the dwelling was not the main residence of an individual referred to in item 2, column 3 of the table in section 118-195 of the ITAA 1997. The total days is the number of days in the period from the death until your ownership interest ends.