ATO Interpretative Decision
ATO ID 2003/770 (Withdrawn)
Income Tax
Capital gains tax: main residence exemption: extension of exemption for dwelling acquired from a deceased estateFOI status: may be released
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This ATO ID is withdrawn as the ATO view on this matter is now reflected in the publication Guide to capital gains tax 2003-04.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 11 March 2005
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Can the Commissioner extend the two year period in the table in paragraph 118-195(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to allow a trustee of a testamentary trust to obtain a full main residence exemption on the disposal of the deceased's main residence?
Decision
No. The Commissioner does not have any discretion to extend the two year period referred to in the table in paragraph 118-195(1)(b) of the ITAA 1997. Consequently, only a partial main residence exemption will be available under section 118-200 of the ITAA 1997 if the trustee sells the deceased's main residence more than two years after their death.
Facts
An individual acquired a dwelling in the 1989-90 income year. The dwelling was the individual's main residence from the start of their ownership period until they died in the 1999-2000 income year.
By their will the deceased left the property on trust for their children in equal shares.
The trustee of the deceased individual's estate sold the dwelling three years after the date of death and made a capital gain. The sale of the dwelling was delayed due to litigation involving the estate.
The trustee requested that the Commissioner extend the two year exemption period in this case so that the capital gain would be disregarded.
The dwelling was not occupied during the time between the deceased's death and when the property was sold.
Reasons for Decision
Section 118-195 of the ITAA 1997 provides when a capital gain or capital loss from certain CGT events that happen in relation to a dwelling in which the trustee of a deceased estate has an ownership interest can be disregarded in full.
For a dwelling acquired by the deceased on or after 20 September 1985 which was the deceased's main residence just before they died and, at that time, was not being used for the purpose of producing assessable income, the trustee will be entitled to a full exemption if:
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- the trustee's ownership interest ends within two years of the deceased's death or
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- the dwelling was, from the deceased's death until the trustee's ownership interest ends the main residence of one or more of:
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- the spouse of the deceased immediately before death (except a spouse who was living permanently separately and apart from the deceased)
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- an individual who had a right to occupy the dwelling under the deceased's will, or
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- an individual beneficiary to whom the ownership interest passed and that person disposed of the dwelling in their capacity as beneficiary.
In this case, the trustee disposed of the dwelling some three years after the deceased's death. Section 118-195 of the ITAA 1997 does not confer on the Commissioner any discretion to extend the two year exemption period referred to in that section. Further, since the dwelling was not occupied by a relevant individual after the deceased's death, the alternative basis of exemption in the section does not apply.
Consequently, a full main residence exemption will not be available to the trustee in respect of the capital gain made from the disposal of the deceased's main residence. The trustee will however be entitled to a partial exemption under section 118-200 of the ITAA 1997.
Date of decision: 28 July 2003Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1997
section 118-195
paragraph 118-195(1)(b)
section 118-200
ATO ID 2003/109
Keywords
Capital gains tax
CGT deceased estates
CGT main residence exemption
Deceased estates
Testamentary trusts
Trustees
ISSN: 1445-2782
| Date: | Version: | |
| 28 July 2003 | Original statement | |
| You are here → | 11 March 2005 | Archived |