Disclaimer
This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au

This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of private ruling

Authorisation Number: 1011464309130

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Capital gains tax - Disposal of deceased's main residence - more than two years after deceased's date of death

Question

Is the capital gain or capital loss made on the disposal of the deceased's unit disregarded?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You are one of the executors (trustees) of the deceased's Will.

The deceased acquired a unit prior to 20 September 1985.

This unit was their main residence for their entire ownership period.

For a number of years prior to their death they resided in hospitals, hostels and nursing homes.

Due to special circumstances the unit remained occupied.

The deceased passed away some years ago.

Under the deceased's Will their children are to get an equal share of their estate.

The unit was valued by a valuer shortly after the deceased death. The unit was valued at $X.

It was the intention of the trustees that the unit would be disposed of shortly after the deceased's death but was not possible due to special circumstances.

No rent was ever received and no improvements were made to the unit during the time of the special circumstances whilst the unit remained occupied.

Two years after the deceased's death you wrote to the Australian Taxation Office (ATO) to advise them of the above.

The unit was vacated sometime later.

Soon after the unit was disposed of for $X.

A capital gain was made on the disposal of the unit.

You have supplied copies of the following document to support your application and these documents are to be read with and forms part of the scheme for the purpose of this ruling:

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 118-195.

Income Tax Assessment Act 1997 Section 110-25.

Income Tax Assessment Act 1997 Section 116-20.

Income Tax Assessment Act 1997 Section 104-10.

Income Tax Assessment Act 1997 Section 115-215

Income Tax Assessment Act 1997 Section 128-15

Reasons for decision

The most common capital gains tax (CGT) event that happens to real estate is its disposal, CGT event A1.

CGT event A1 occurred when you disposed of the deceased's unit.

If you acquire an asset owned by a deceased person as their trustee, you are taken to have acquired the asset on the day the person died.

If the deceased person acquired their asset before 20 September 1985, the first element of your cost base and reduced cost based is the market value of the asset on the day the person died.

In your case, you acquired the deceased's unit on their death for its market value.

You have made a capital gain from the disposal of the deceased's unit. There will be a CGT liability due to this disposal unless an exemption applies to it.

Main residence exemption

If a deceased person's main residence devolves to the trustees of their estate, they may be exempt or partially exempt from CGT when a CGT event happens to it.

Generally, a trustee can disregard a capital gain or capital loss made on the disposal of the deceased's main residence if the trustees' ownership interest ends within two years of the deceased's death or from the deceased's death until it is disposed of, the main residence of one or more of:

The trustees' ownership interest in the deceased's unit ended for the main residence exemption purposes on the settlement of its disposal.

In this case, your ownership interest in deceased's unit did not end within the two years of the deceased's date of death. Due to circumstances the unit was occupied for more than a specified period, so it was not the main residence of the spouse of the deceased immediately before the deceased's death or an individual who had a right to occupy the dwelling under the deceased's will.

Therefore, as the unit was not disposed of within two years of the deceased's death any capital gain made on the disposal of the deceased's unit cannot be disregarded, in part or in full.

Whilst the Commissioner recognises your personal circumstances, he has no discretion on any of the aforementioned main residence exemption requirements.

You can use the discount method to calculate your capital gain as are a trustee of a trust as:

For information on how to calculate please see the enclosed information, which has been taken from the Guide to capital gains tax 2008-09 (NAT 4151-6.2009).

Note: A beneficiary, who is entitled to a share of a trust's net capital gain which included a net capital gain that has been reduced by the CGT discount, is required to gross up the capital gain by multiplying that gain by two. This allows for the beneficiary to apply any capital loss and then apply the CGT discount.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).