Private ruling: Deceased estate
Date of advice: 28 May 2020
Published: July 2020
Ruling period: Year ending 30 June 2020 | Year ended 30 June 2019
Date scheme commenced: 23 December 2018

Ruling: Q1: Can you disregard any capital gain or capital loss for the deceased estate under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. The deceased owned property acquired before 20 September 1985 and this was their main residence at the time of death. In this case, the deceased acquired ownership interest in the property before 20 September 1985 and in accordance with the terms of the will, the trustee disposed of the dwelling (that passed to the beneficiaries) in 20XX. Any capital gain or capital loss you make can be disregarded under section 118-195 of ITAA 1997, with any net proceeds being distributable from the deceased's estate. You can find further information on deceased estates and inherited dwelling by searching our website under QC52246.

Relevant facts and circumstances: The deceased passed away in 20XX. In 19XX the deceased and spouse purchased property jointly and this was their main residence. In 19XX the deceased and spouse (ex-spouse) executed and filed a Deed of Settlement in the Family Law Court of Australia, where they agreed to separate their assets and property they jointly owned. The property at X was agreed by the deceased and ex-spouse to transfer the whole of the ex-spouse's right title and interest wholly to the deceased. As from this date the deceased was to be solely responsible for all the outgoings and agreed to indemnify the ex-spouse from all liability of whatsoever kind and nature in respect of the said outgoings. In 19XX, the ex-spouse left the main residence and the deceased continued to reside at the dwelling until date of death. The ex-spouse ceased to have any entitlement to any use or enjoyment of the property and the deceased, from that date, had a vested and indefeasible and absolute interest in the property. Despite the terms of the Deed of Settlement, the parties never executed the transfer to affect the transfer of title to the deceased and remove the ex-spouse name from the title deed. The deceased left a Will and probate was granted. An executor and trustee were appointed for the deceased's estate. The Will stated the whole of the estate to be given to the trustees and pay from it all the expenses and subject thereto to hold the balance remaining on trust to be divided amongst the deceased's children and ex-wife in certain number of shares. The property was still jointly owned by the deceased and ex-spouse at the time of the deceased's death. The ex-spouse did all things necessary and advised the Land Titles office of the deceased's death and the property was transferred solely to the ex-spouse and vested in the ex-spouse's name. The ex-spouse held the property on trust for the deceased in absolute entitlement and under the terms of the will (as trustee) disposed of the property in 20XX. The net proceeds are held in a trust account.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 106-50 | Income Tax Assessment Act 1997 section 118-195