Private ruling: Deceased estate - main residence exemption
Published: August 2022
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 May 20XX

Ruling: Q1: Are you entitled to the main residence exemption on the sale of the Property under section 118-195 of the Income Tax Assessment Act 1997 ? | A1: No.

Relevant facts and circumstances: You are not registered for GST. You are an Australian tax resident. You inherited the Property from your parent who passed away in 20XX. Legal title of the Property was transferred to you in 20XX and the Estate of your late parent was finalised in that same year. Your parent had inherited the Property on the death of the late spouse in 19XX. The late spouse originally purchased the Property in 19XX. The Property was the main residence of your parent until they moved into another home (House A) which your parent inherited from the sibling. Since then, the Property had been vacant. Your parent lived at House A from 20XX to 20XX. She sold House A in 20XX and treated it as the main residence for the entire period of ownership. Your parent moved into a nursing home in late 20XX. Once House A was sold, the Property was the only real estate owned by your parent just before they died. The Property had never been used to produce assessable income. The Property sold for over $XXX at auction in November 20XX, settling in the following month.

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

Reasons for decision: Summary: Legislative references are to the Income Tax Assessment Act 1997 unless otherwise specified. An individual beneficiary who inherited a dwelling or an ownership interest in a dwelling from a deceased estate may claim the main residence exemption if certain conditions in subsection 118-195(1) are satisfied. Relevantly, the main residence exemption is available if the dwelling was the main residence of the deceased immediately before death and was not being used to produce assessable income. | Detailed Reasoning - Application to your circumstances: In this case, although your parent owned the Property and it was not used to produce assessable income, the Property was not the main residence just before the death because your parent was living in a nursing home since 20XX until their passing in 20XX. As such, the condition in subsection 118-195(1) is not satisfied. Therefore, you are not entitled to the main residence exemption on the sale of the Property under section 118-195.