Private ruling: Capital gains tax - deceased estate, life tenant and disposal of main residence
Published: November 2011
Ruling period: 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1:  | A1:  | Q2:  | A2: 


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 128-15 | Income Tax Assessment Act 1997 Section 118-110 | Income Tax Assessment Act 1997 Section 118-195 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 115-10 | Income Tax Assessment Act 1997 Section 114-1 | Income Tax Assessment Act 1997 Section 114-10

Reasons for decision: Summary: You make a capital gain or capital loss if a CGT event occurs to a CGT asset that you own. The most common CGT event (CGT event A1) occurs if you dispose of a CGT asset to someone else. The time of the event is when you enter into the contract, or if there is no contract - when the change of ownership occurs. In your situation, a CGT event A1 occurred when you disposed of the property. If you acquire a CGT asset as an executor or beneficiary of a deceased estate, you are taken to have acquired the asset on the day that the deceased died. If you acquire a dwelling the deceased had owned, there are special rules for calculating your cost base. The first element of the cost base and reduced cost base of a dwelling - its acquisition cost, is its market value on the date of death if either: · the dwelling was acquired by the deceased before 20 September 1985, or · the dwelling passes to you and it was the main residence of the deceased immediately before their death and was not being used to produce income at that time. A beneficiary can include in the cost base and reduced cost base the expenditure that the executor would have been able to include at the time asset passes to them. Deceased's main residence A capital gain or capital loss is disregarded when a CGT event happens to a deceased person's main residence that you acquired as an executor or beneficiary of a deceased estate after 20 September 1985, if: · you are an individual and any of the following apply: o your ownership interest ends within two years of the person's death - that is, if the dwelling was disposed of under a contract and settlement occurred within two years o from the deceased's death until your ownership interests ends the dwelling was the main residence of one or more of: § the spouse of the deceased immediately before death, § an individual who had a right to occupy the dwelling under the deceased's will, or § you, as a beneficiary, if you disposed of the dwelling as a beneficiary How the law applies to your circumstances. You acquired the two separate interests in the property with two separate cost bases. The first interest you acquired was on your parent's date of death for its market value on that date. Under your parent's Will no one had a right to occupy the property and as this interest was not disposed of with two years of their death you are not entitled to any exemption on the disposal of this interest. The second interest you acquired was when your relative died for its market value on that date. Under your relative's Will you did not have a right to occupy the property and as this interest was not disposed of with two years of their death you are not entitled to any exemption on the disposal of this interest. The Commissioner does not have the discretion to extend this two year period under any circumstances. You can use either the indexation or discount method to calculate your capital gain on the first interest you acquired from your mother's estate as you acquired this interest prior to 21 September 1999. You can use the discount method to calculate your capital gain as you meet all the relevant criteria on the interest you acquired from your uncle's estate. For more information on deceased estates, indexation and discount methods, how to calculate your capital gain or capital loss and the cost base please see the enclosed information sheet. This information has been taken from the Guide to capital gains tax 2010-11 (NAT 411-6.2011). Further information is also available on our website - www.ato.gov.au.

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. | Subject: Capital gains tax - deceased estate, life tenant and disposal of main residence: Question 1: Are you liable for capital gains tax (CGT) on the interest in the property you acquired from your parent's estate for the period between your parent's death and your relative's death? | Question 2: Are you liable for CGT on the two interests in the property you acquired from two deceased estates for the period from your relative's date of death until its disposal? | Relevant facts: In 19XX your parent and your relative each acquired a property (the property) as tenants in common as beneficiaries under their late relative's Will. | Early 19XX your parent passed away and you inherited their interest under their Will in the property (that will did not give any right to occupy). | Your parent's interest in the property was valued at $X on their date of death. | Your relative resided in the property as their main residence from 19XX until their death in early 20XX. | You were your relative's sole carer. | Your relative was unwell for the last couple of years of their life. | Your relative was not interested in undertaking renovations, repairs, moving into a retirement village or nursing home, anyone else living in the property or its disposal. | You acquired your relative's interest in the property under their Will (that will did not give any right to occupy). | The property was valued at $X on their date of death. | You had a land tax exemption on the property until early 2005. | The property was not occupied between early 2005 and its disposal in late 2010 due to the poor condition of the house. | You have provided copies of the following documentation to support your application and these documents are to be read with and forms part of your application for the purpose of this ruling: | · Probate certificate for your parent | · Certificate of Title dated | · Probate certificate for your relative | · Certificate of Title dated late 20XX, and | · correspondence dated late 20XX from your solicitor.