Private ruling: Capital gains tax - deceased estate - estate in remainder - disposal of dwelling
Published: April 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Can you disregard the capital gain made on the disposal of your property? | A1: No.


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 108-5 | Income Tax Assessment Act 1997 Section 118-130 | Income Tax Assessment Act 1997 Section 118-195

Reasons for decision: Detailed Reasoning - CGT event: You make a capital gain or a capital loss if and only if a capital gains tax (CGT) event happens to a CGT asset. CGT event A1 happens if you dispose of a CGT asset. A CGT asset is any kind of property or a legal or equitable right that is not property. An interest in a CGT asset is also a CGT asset. You dispose of a CGT asset if a change of ownership occurs from you to another entity. The time of the event is when you enter into the contract for the disposal or if there is no contract, when the change of ownership occurs. Life interests and remainder interests are terms used to describe the interest that an entity has as either a beneficiary of a trust (equitable life or remainder interest) or, less commonly, as the owner of a freehold estate in land (legal life or remainder interest). The death of the life interest owner has no CGT consequences for the remainder owner. The remainder owner does not acquire any asset from the life interest owner; their existing interest is merely enlarged. In your situation you now have a fee simple interest unencumbered by the life interest of your late parent. | Detailed Reasoning - Disposal of the dwelling: You are taken to have acquired your share in the dwelling after 20 September 1985 when your name was entered on the title. Therefore, your ownership in the dwelling commenced on this date and will end when the dwelling is disposed. You did not acquire your interest in the property as a result of being a beneficiary of your late parent's estate and accordingly the rules as set out in section 118-195 of the Income Tax Assessment Act 1997 do not apply to you. In your case, you acquired an interest in the property after 20 September 1985 when your name was entered onto the title in remainder. On the death of your parent you acquired absolute title to the property and accordingly upon disposal of the property you will not be able to disregard any CGT liability that you may incur.

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. | Relevant facts: You were included on the title to a property in an estate in remainder. | The property was the main residence of your parent and was purchased prior to 20 September 1985. | Your parent was included on the title to the property as a legal life estate. | Your parent passed away after 20 September 1985. | The property has recently been tenanted. | You will sell the property and make a capital gain. | You have supplied the following document, which forms part of, and should be read in conjunction with this private ruling.