Private ruling: Capital gains tax - Deceased estate - Disposal
Published: June 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Is the capital gain made on the disposal of the deceased's main residence disregarded? | A1: No. | Q2: Is the capital gain made on the disposal of the deceased's main residence disregarded in part? | A2: Yes. | Q3: Is the net income of the estate required to be included in the beneficiaries' income tax returns? | A3: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 118-195 | Income Tax Assessment Act 1997 Section 118-200 | Income Tax Assessment Act 1997 Section 128-15 | Income Tax Assessment Act 1936 Section 97

Reasons for decision: Summary: In your particular situation, capital gains tax (CGT) event A1 occurred when you disposed of the deceased's main residence. However, there are a number of different exemptions or exceptions that, if they apply, can mean that a capital gain or capital loss that you make as a result of a CGT event can be disregarded, either in full or in part. In your case section 118-195 of the Income Tax Assessment Act 1997 outlines the conditions under which the capital gain or capital loss can be disregarded in full. Where a dwelling was originally acquired by the deceased on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death and was not used to produce assessable income, to disregard any capital gain: · you need to dispose of the property within two years of the deceased's death; or · from the deceased's death until your ownership period ended the dwelling needs to have been main residence of the deceased's spouse or an individual who had the right to occupy the dwelling under the will of the deceased. In this case, relative A resided in the property as their main residence until they permanently vacated the dwelling. Only a partial main residence exemption can be obtained as relative A did not occupy the property as their main residence for all of your ownership period. The non-exempt portion of any capital gain or capital loss is calculated as follows: Capital gain or capital loss X Non-main residence days Total days Capital Gain or Capital Loss is the amount that you made from the disposal of the property. Non main residence days are the number of days from the day relative A moved out until settlement of the contract for disposal. Total days are the number of days from the death of the deceased until settlement of the disposal of the property. The deceased's will, provides that the remainder beneficiaries are jointly entitled to all of the income earned by the trust from the date that relative A permanently vacated the property. Beneficiaries are presently entitled to the net income of the trust (including net capital gains) to the extent that they are entitled to a share of the income of the trust and they will need to include their share of that net income in their income tax return.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: The deceased purchased a block of land prior to 20 September 1985. | The deceased constructed a dwelling on the land after 20 September 1985. | The deceased passed away a number of years ago. | Probate was granted after a period of time. | You have supplied a document, which forms part of and should be read in conjunction with this private ruling: | · Certified copy of the deceased's will. | We have obtained the following information from this document: | · The deceased gave to relative A, the use and enjoyment of a dwelling for as long as they resided in it. | · The residuary beneficiaries of the estate are the deceased's relatives. | · The beneficiaries are presently entitled to the estate of the deceased. | Relative A occupied the dwelling from the death of the deceased for a number of years. | Relative A entered a nursing home and passed away after a number of years. | The property was tenanted for a period of time and was recently sold by the trustee of the estate.