Private ruling: Capital gains tax
Date of advice: 5 February 2021
Published: March 2021
Ruling period: Year ending 30 June 2021
Date scheme commenced: 1 July 2020

Ruling: Q1: Does Income Tax Assessment Act 1997 (ITAA 1997) sections 118-150 and 118-155 have the effect of allowing the executor to treat the property as the deceased's main residence? | A1: Yes. The executor can make the election for the property to be the main residence of the deceased. | Q2: Will Income Tax Assessment Act 1997 section 118-195 apply to disregard any capital gain if the property is disposed of within 2 years? | A2: Yes. If the property is sold within 2 years of the deceased's date of death any capital gain will be disregarded. The property must be sold prior to XX XXXX 20XX for the gain to be disregarded.

Relevant facts and circumstances: The deceased purchased a property in early 20XX. The deceased moved into the property straight away and made the property their main residence. Late 20XX the deceased moved out of the property and began to rent it out deriving assessable income. The property was then sold early 20XX (contract date), with settlement occurring later in 20XX. The deceased elected this property to be their main residence for the whole of her ownership period. In early 20XY the deceased purchased a vacant block of land, with the intention of building a house on it and treating it as their main residence once construction of the dwelling was completed. Construction of a dwelling began in early 20XX. The deceased passed away on mid 20XX. Construction was completed on the property mid 20XX and the deceased's spouse moved into the property late 20XX. The title deed for the property was solely in the deceased's name. The spouse is the executor of the deceased estate, and ownership of the property will pass to the spouse once the necessary legal steps are completed, as per the deceased's will. Ownership should transfer to the spouse in the next X months, and they will try and sell the property within the next XX months, certainly within 2 years of the day of death of the deceased. The trustee of the deceased's estate makes the election for the property to be the deceased's main residence from the date they passed.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-150 | Income Tax Assessment Act 1997 section 118-155 | Income Tax Assessment Act 1997 section 118-195