Private ruling: Main Residence - CGT exemption
Date of advice: 9 November 2015
Published: November 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2016

Ruling: Q1: Is a full main residence exemption under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) available to the trustee of the deceased's estate? | A1: Yes | Q2: Will the Commissioner exercise his discretion under subsection 118-195(1) of the ITAA 1997? | A2: Not applicable - see reasons for decision


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows the trustee of a deceased estate to disregard any capital gain or loss made from a CGT event that happens in relation to a dwelling that a deceased person acquired before 20 September 1985 if: (a) the trustee's ownership interest in the dwelling ends within 2 years of the deceased's death, or (b) from the deceased's death until the trustee's ownership interest ends, the dwelling was the main residence of one or more of the following persons: (i) the spouse of the deceased immediately before death; or (ii) an individual who had a right to occupy the dwelling under the deceased's will; or (iii) an individual who brought about the CGT event and the ownership interest in the dwelling passed to that individual as beneficiary. In this case, the trustee's ownership interest in the dwelling ended more than 2 years after the date of the deceased's death. However, a full main residence exemption is available if the dwelling was the main residence of one of the specified individuals during the trustee's ownership period. A relative of the deceased was given a life interest to occupy the dwelling under the deceased's will and this occupancy occurred except for the period of time when the relative entered a care facility prior to death. The executors of the relative's estate advised they have elected to treat the dwelling as the main residence up to the date of death. The trustee's ownership of the dwelling ceased when the dwelling was sold. This sale occurred within a reasonable time following the death of the relative. For the purposes of determining whether the full exemption is available to the trustee under section 118-195 of the ITAA 1997, the dwelling must be the main residence of the individual who has the right to occupy it from the deceased's death until the trustee's ownership interest ends. On this occasion a full exemption under section 118-195 of the ITAA 1997 is available to the trustee of the deceased's estate. As a full exemption is available, there is no need to consider the Commissioner's discretion.

Relevant facts: The taxpayer (the deceased) died. Prior to their death they lived in a residential property that they had acquired prior to 20 September 1985. | The deceased had a valid will and in the will they bequeathed a life interest in the property to a relative. | The relative resided at the property until 20XX when the relative moved to an aged care facility and died in 20YY. The property was vacant following the relative's death and it has not been used for income producing activities. | The executor of the relative's estate has elected to treat the property as the relative's main residence up to the date of their death by virtue of a choice under section 118-145 of the ITAA 1997. | The property was sold as part of finalising the deceased's estate and settled in 2015.