Private ruling: CGT - main residence exemption and adjacent land for a deceased estate and the disposal of an inherited dwelling
Date of advice: 28 April 2022
Published: July 2022
Ruling period: Income year ending 30 June 20XX.
Date scheme commenced: 1 July 20XX.

Ruling: Q1: Does the main residence exemption extend to Property B? | A1: Yes. Property B was acquired a significant period after Property A was purchased, on which the residence was located. The two properties, collectively referred to as the Properties: • had a combined total area of less than two hectares • were used together for private purposes during the Deceased's ownership periods; and • were sold together in the same sale transaction. Therefore, in accordance with the principles contained in Taxation Determination TD 92/171, the main residence exemption applicable to Property A will extend to Property B. | Q2: Can you fully disregard any capital gain or loss made from the sale of the Properties? | A2: Yes. The Deceased held two separate ownership interests for capital gains tax purposes in both Property A and B when they passed away, being their original ownership interest in each property, and the ownership interest in each property they inherited from Person A. The Deceased had resided at the Properties since they were acquired until they passed away. The Properties were sold in a single sale transaction by you as the trustee of the Deceased Estate, with settlement occurring within two years of the Deceased's passing. Therefore, in accordance with the application of section 118-195 of the Income Tax Assessment Act 1997, you can disregard any capital gain or loss made on the sale of the Properties.

Relevant facts and circumstances: The Deceased and Person A jointly purchased Property A prior to 20 September 1985 where they resided. However, the property did not provide adequate space for a garage with internal access to the residence located on it. The Deceased and Person A jointly purchased Property B after 20 September 1985 for the purpose of extending the size of the area used for their residence, which was vacant land adjoining Property A. From the time Property B was purchased, it and Property A were used together for private use as one property. A double garage was constructed on Property B to provide connectivity to the residence, in addition to being used as an adjoining garden and open area abutting the residence. There was no fencing between the Properties. The combined land area of the Properties was less than two hectares. The local council had consolidated and issued a single rate notice for the Properties. The titles of the Properties were never consolidated, being on two separate titles. Person A passed away their ownership interests in the Properties passed to the Deceased. The Deceased continued to reside at the Properties until they passed away. The Properties were sold under a single sale contract by you as trustee of the Deceased Estate. Settlement on the sale of the Properties occurred during the ruling period, within two years of the date the Deceased passed away.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-120 | Income Tax Assessment Act 1997 section 118-165 | Income Tax Assessment Act 1997 section 118-195