Private ruling: Capital Gains Tax - main residence
Date of advice: 31 March 2017
Published: August 2017

Ruling: Q1: Subsection 118-195(1) of the ITAA 1997 states that if you own a dwelling in your capacity as trustee of a deceased estate (or it passed to you as a beneficiary of an estate), then you are exempt from tax on any capital gain made on the disposal of the property if: ● the property was acquired by the deceased before 20 September 1985, or ● deceased acquired dwelling after 20 September 1985 and it was their main residence just prior to death and ● your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed). In this case, the property was purchased by the deceased before 20 September 1985 but was not sold within two years of the deceased's date of death. The Estate will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the two year time period. The Commissioner can exercise his discretion in situations such as where: ● the ownership of a dwelling or a will is challenged; ● the complexity of a deceased estate delays the completion of administration of the estate; ● a trustee or beneficiary is unable to attend to the deceased estate due to unforeseen or serious personal circumstances arising during the two-year period (for example, the taxpayer or a family member has a severe illness or injury); or ● settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary or trustee's control In this case, probate on the estate was delayed due to disputes and legal action on behalf of the beneficiaries. A Trustee was appointed administrator of the estate but experienced lengthy delays outside of his control. We accept that the Trustee made a genuine effort to administer the estate and sell the property. Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time. Other Information As outlined in subsection 104-10(3) of the ITAA 1997, the time of the CGT event A1 is when you enter into the contract for the disposal. The Commissioner considers the CGT event A1 was on the date when the correct contract was signed rather than the contract that was rescinded due to incorrect information on the document.




Subject: Capital Gains Tax - main residence: The deceased passed away. | The deceased owned a property. | The deceased purchased the property as a joint tenant with their spouse. | On the death of their spouse, the deceased became the sole owner. | The deceased used the property as their main residence for the entire ownership period. | Due to a dispute between the beneficiaries and subsequent proceedings to resolve the dispute probate was delayed. | Proceedings were resolved by orders made by consent. | There was a trustee/executor of the deceased Estate. | Letters of administration with the will was granted. | The Trustee registered a Transmission Application and became the registered proprietor of the home unit in the capacity as the administrator of the estate. | The Trustee commenced the process to put it on the market. | The Trustee engaged real estate agents for the marketing and sale of the home unit by public auction. | The property was sold at auction, but due to complications this contract was rescinded. | A new contract with the original trust remaining as the purchaser and the items and conditions of the contract remain the same as the original rescinded contract.