Private ruling: CGT - Main Residence Exemption
Date of advice: 16 April 2026
Published: 13 July 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: For the purposes of subdivision 118-B of the Income Tax Assessment Act 1997 (ITAA 1997), is the ownership interest you acquired from your deceased spouse taken to have passed to you as a beneficiary of their deceased estate? | A1: Yes. | Q2: If yes does subsection 118-190(4) of the ITAA 1997 apply such that your deceased spouses' income producing use is disregarded when determining your eligibility for the main residency exemption? | A2: Yes. | Q3: If section 118-190 0f the ITAA 1997 applies, will you be entitled to a full main residency exemption on the disposal of the dwelling if you continue to use it solely as your main residence? | A3: Yes.

Relevant facts and circumstances: On DD MM YYY, you and Person A (your spouse) acquired a dwelling (the property). You and your spouse held the property as tenants in common in equal shares and occupied it as your main residence. The property was situated on less than two hectares of land. A portion of the property was used by your spouse for income-producing purposes, operating as a studio for the following periods: • 20XX-XX income years • 20XX-XX income years. During the years your spouse used part of the property to earn income, they claimed deductions for the related expenses, including pro-rata electricity and rates. On DD MM YYYY, your spouse passed away, and the relevant circumstances at that time were as follows: • your spouse passed way in hospital approximately XX months after admission • immediately before death, the dwelling was your spouse's main residence, and • was not being used to produce assessable income. On your spouse's death, you became the sole registered proprietor by operation of the right of survivorship. Your spouse's interest did not form part of their estate for succession law purposes. You are Australian residents for tax purposes, with your spouse retaining that status immediately prior to her death. Since your spouse's death, you have continued to occupy the dwelling as your main residence and have not used it to produce assessable income. You are considering selling the dwelling and wish to treat the period during which your spouse was in hospital as a period of absence for the purposes of the main residence exemption. Assumptions For the purposes of this ruling, it is assumed that the facts and circumstances of your situation, as outlined above, will not materially change during the ruling period, including up to the time you dispose of the dwelling.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 118-B | Income Tax Assessment Act 1997 section 118-145 | Income Tax Assessment Act 1997 section 118-185 | Income Tax Assessment Act 1997 section 118-190 | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 section 118-197

Reasons for decision: Summary: When your spouse passed away, you are taken to have acquired that interest as beneficiary of the deceased estates. | Detailed Reasoning - Detailed reasoning: Subdivision 118-B of the Income Tax Assessment Act 1997 (ITAA 1997) contains special rules dealing with dwellings acquired from a deceased person. Section 118-197 of the ITAA 1997 provides a specific rule for situations involving joint tenancy. Under section 118-197 of the ITAA 1997, Subdivision 118-B applies as if the deceased individual's ownership interest in the property had passed to the surviving joint tenant as a beneficiary of a deceased estate, where: • the surviving individual and the deceased individual held their interests in the dwelling as joint tenants, and • the deceased individual dies. The provision treats the surviving joint tenant as having acquired the deceased's ownership interest in the same way a beneficiary acquires an interest in a dwelling from a deceased estate. | Detailed Reasoning - Application to your circumstances: You and your spouse acquired the property as joint tenants. When your spouse later died, their ownership interest in the property passed to you by survivorship. As you and your spouse held the property as joint tenants and your spouse has died, the conditions in section 118-197 of the ITAA 1997 are satisfied. Accordingly, Subdivision 118-B of the ITAA 1997 applies as if your spouse's ownership interest in the property had passed to you as a beneficiary of their deceased estate. | Summary: As the property passed to you as a beneficiary, any income-producing use of the dwelling before your spouse's death is disregarded. This is because the property was their main residence immediately before death and was not being used to produce assessable income at that time. | Detailed Reasoning - Detailed reasoning: Subsection 118-190(4) ITAA 1997 provides that where a property, or an ownership interest in a property, passes to a beneficiary of a deceased estate (or is held by the trustee of a deceased estate), any income-producing use of the property before the deceased's death is disregarded if: (a) the property was the deceased's main residence just before their death; and (b) the property was not being used to produce assessable income at that time (or any such use is disregarded under subsection 118-190(3) of the ITAA 1997. Section 118-145(1) of the ITAA 1997 provides that if a property that was a taxpayer's main residence and ceases to be so, the taxpayer may choose to treat that property as their main residence. Where part of the property was used to produce assessable income, subsection 118-145(2) of the ITAA 1997 provides that the maximum period of time that the property can be treated as the taxpayer's main residence is 6 years while the property is used to produce assessable income. If the property is not used for an assessable income producing purpose, subsection 118-145(3) of the ITAA 1997 provides that it can be treated as a main residence indefinitely. | Detailed Reasoning - Application to your circumstances: Based on the facts provided, the property was your spouse's main residence immediately before they passed away. The period during which your spouse was hospitalised for XX months before their death does not affect this outcome. At that time, the property was also not being used to produce assessable income. Accordingly, the requirements in subsections 118-190(4) and 118-145(3) of the ITAA 1997 are satisfied. As you and your spouse held the property as joint tenants, you are taken to have acquired your spouse's ownership interest in the property at the time of their death. In applying the main residence exemption to that ownership interest, any income-producing use of the property that occurred before your spouse's death is disregarded. This includes: • your spouse's income-producing use of part of the property during the 20XX-XX income years; and • your spouse's income-producing use of the same part of the property during the 20XX-XX income years. As these periods of income-producing use occurred before your spouse's death, and the property satisfied the requirements of subsections 118-190(4) and 118-145(3) of the ITAA 1997 at that time, they are disregarded when determining the extent of the main residence exemption that applies to the ownership interest you acquired. | Summary: You acquired the deceased's ownership interest in the property as the surviving joint tenant following your spouse's death. Any capital gain or capital loss arising from the disposal of the property is disregarded. | Detailed Reasoning - Detailed reasoning: Section 104-10 of the ITAA 1997 provides that CGT event A1 happens when a CGT asset is disposed of. Section 118-195 of the ITAA 1997 provides that a capital gain or capital loss you make from a CGT event that happens in relation to a property or your ownership interest in a property is disregarded if: • you are an individual who received the interest as a beneficiary of a deceased estate, or you held the interest in your capacity as the trustee of a deceased estate, and • the deceased acquired the interest post-CGT, the property was their main residence and not income-producing at the time of death, and • the property was, from the deceased's death until your ownership interest ends, the main residence of one or more of the following: (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 property 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 | Detailed Reasoning - Application to your circumstances: You satisfy all the conditions prescribed under section 118-195 of the Income Tax ITAA 1997. Immediately before the deceased's death, the property was owned jointly by you and your spouse. Upon the death of your spouse, you became solely entitled to the property by operation of the right of survivorship, as the surviving joint tenant. Upon disposal of the property, CGT event A1 occurs under section 104-10 of the ITAA 1997. However, as you acquired the ownership interest from the deceased and the requirements of section 118-195 of the ITAA 1997 are satisfied, any capital gain or capital loss arising from the CGT event is disregarded.