Private ruling: Capital gains tax
Date of advice: 30 April 2019
Published: June 2019
Ruling period: 1 July 2009 to 30 June 2020.
Date scheme commenced: 1 July 2009.

Ruling: Q1: Can you apply the main residence exemption to disregard any capital gain or loss when you dispose of the property? | A1: Yes. Based on legal advice your trustee held the fractional share of the property on trust for you absolutely. As such no CGT event happens when the fractional share of the property is transferred to you by the Trustee. When you dispose of the property, you can apply the main residence exemption to disregard any capital gain or loss from the disposal event because you use the property as your main residence. Even if you use the property to produce assessable income you can choose to continue to treat it as your main residence for up to six years at a time provided you do not treat any other property as your main residence during that time. Under the absence rule you can choose to treat the property as your main residence indefinitely if it is not used to produce income. The main residence exemption can apply to the whole of your ownership period of the property provided all the relevant conditions for the main residence exemption are satisfied. Further information can be found by searching QC52189 on ato. gov.au.

Relevant facts and circumstances: The deceased (your father) died in 20XX. The Will of your father named an executor and trustee for his estate. The Will created a testamentary trust for you having a trust fund value representing your share of your father’s estate with the executor as the Trustee. The Trustee assisted you in purchasing an apartment (the property). You purchased the property in 20XX. The purchase was funded by cash from the testamentary trust being part of your share from your father’s estate plus a loan you obtained. The contract of sale showed the purchasers as you and the Trustee; and an entity as the vendor. The legal title of the property is held as tenants in common by the trustee and you. You were provided with the occupancy certificate and settlement occurred and you moved in to the property in 20XX. During your ownership of the property (at times) you have travelled overseas but you did not make the property available for rent. The Trustee of your testamentary trust wishes to wind up the trust and you also formally requested for the winding up of the trust. The Trustee sought legal advice indicating that the trust assets could be distributed to you absolutely. The advice noted that: ● You are the only beneficiary in the testamentary trust; ● The Will does not provide what might happen if you predecease a family relative; ● You are single and have no children; ● You have a vested interest in the trust and regardless of any subsequent event, your interest will remain. Based on the advice, the Trustee has confirmed they will transfer the fractional share of the property to you so you will hold the property absolutely having 100% interest in it. You have recently relocated interstate and have left your property vacant. You are considering making the property available for rent but you will be choosing to continue to treat the property as your main residence under the absence rule. You intend to dispose of the property in the near future.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | section 118-110 | section 118-145