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(a) The deceased acquired the dwelling before 20 September 1985.
The dwelling would have been exempt from capital gains tax if the deceased person had disposed of it, whether it was their main residence or not.
If you have an ownership interest in a dwelling that passes to you as a beneficiary in a deceased estate or you own it as trustee of a deceased estate, any capital gain or loss you make from a CGT event that happens in relation to the dwelling is disregarded if any of the following applies.
- Your ownership interest ends on or before 20 August 1996 and within 12 months of the person's death.
- Your ownership interest ends after 20 August 1996 and within 2 years of the person's death. This applies whether r not you used the dwelling to produce income during the 2-year period. The dwelling does not have to be your main residence during the 2-year period.
- From the deceased's death until your ownership interest ends, the dwelling was not used to gain or produce income and it was also the main residence of one or more of:
- the spouse of the deceased immediately before death but not a spouse who was permanently separated
- an individual who had a right to occupy the home under the deceased s will
- you as a beneficiary if you are disposing of the dwelling as a beneficiary.
(b) The deceased acquired the dwelling on or after 20 September 1985.
Any capital gain or loss you make when a CGT event happens in relation to a dwelling or ownership interest in a dwelling you inherit will be disregarded if:
- one of the conditions 1, 2 or 3 in (a) above is met and
- the dwelling passed to you as beneficiary or executor on or before 20 August 1996, the deceased used the home as their main residence from the date of acquisition of their ownership interest until their death and did not use it to gain or produce income or
- the home passed to you as beneficiary or trustee after 20 August 1996, it was the deceased's main residence just before the date of death and was not being used at that date to produce income.
A dwelling can still be regarded as their main residence even if the deceased was not living in it - for example, if the person moved to a nursing home and had rented out the home for less than 6 years at the time of death. The deceased may have elected, r the executor may elect, that the home remain the main residence during the period of absence.
However, if a home is being used to produce income as well as being lived in, it is taken to have been used for producing income.
Roger was the sole occupant of a home which he bought in April 1990 that is, after 20 September 1985. He did not live in or own another home. He died in January 1999 and left the house to his son, Peter. Peter rented out the house and then disposed of it 15 months after his father died. Peter is entitled to a full exemption from capital gains tax on the disposal f this house as he disposed of it within 2 years of his father's death.
If the home had passed to Peter on or before 20 August 1996, he would not have been fully exempt as it was not sold within 12 months of his father's death and was not Peter's main residence.
Last modified: 18 Sep 2009QC 18323