The formula for calculating the partial main residence exemption is adjusted if the deceased individual also acquired the interest in the dwelling on or after 20 September 1985 as a beneficiary (or trustee) of a deceased estate. The main residence exemption is calculated having regard to the number of days the dwelling was the main residence of yourself and the previous beneficiaries.
Example 89: Partial exemption for beneficiaries
Ahmed acquired a dwelling after 20 September 1985.
The dwelling was his main residence from the date of settlement of the contract for purchase until he died. The number of days Ahmed owned the dwelling was 3,700.
Under his will, Ahmed left the dwelling to his son, Fayez. Fayez was the sole beneficiary of Ahmed’s estate. No other individual had a right to occupy the dwelling under Ahmed’s will.
Some years later, Fayez died. He had owned the dwelling for 2,600 days and it wasn’t his main residence at any time during this period.
The dwelling was left to Mardianah under Fayez’s will.
Mardianah sold the dwelling in 2020–21 and made a capital gain of $100,000. She owned the dwelling for 750 days and it wasn’t her main residence at any time during that period.
The taxable proportion of Mardianah’s $100,000 capital gain is $47,518. This is worked out as follows:
$100,000 × (2,600 + 750) ÷ (2,600 + 750 + 3,700) = $47,518
Because the combined period that Ahmed, Fayez and Mardianah owned the dwelling was more than 12 months, Mardianah can reduce her $47,518 capital gain by the 50% discount (after deducting any capital losses).
Because Mardianah gets an exemption for the period the dwelling was Ahmed’s main residence, her capital gain is less than it otherwise would have been.
End of example