1011519001770 | Legal database

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Edited version of private ruling

Authorisation Number: 1011519001770

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Ruling

Subject: Capital gains tax - deceased estate

Question and answer:

Can you disregard the capital gain on the sale of the dwelling?

Yes

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 the spouse of the deceased.

The first codicil of the last will of the deceased stated that the trustee of their estate, prior to the distribution of his residuary estate, was to purchase a suitable dwelling for your relative.

You were appointed as the deceased's trustee in the deceased's last will.

The deceased died after 20 September 1985.

Using funds from the deceased's estate, you purchased a dwelling (the dwelling) for your relative in their best interests. You purchased the dwelling in your name as a safeguard against it being sold or used as collateral by your relative and their partner.

Although the dwelling was in your name, you always believed the property belonged to your relative.

You left the dwelling to your relative in your will in the event of your death.

Your relative and their partner used the dwelling as their main residence for its period of ownership. They paid for running expenses of the property including water, rates, electricity and repairs.

Your never used the dwelling for your personal purposes.

You and your relative made major decisions for the whole period of ownership. You both decided to sell the dwelling. A capital gain was made on sale.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 118-210.

Income Tax Assessment Act 1997 Section 118-210(3).

Income Tax Assessment Act 1997 Section 118-210 (5).

Reasons for Decision

Section 118-210 of the Income Tax Assessment Act 1997 (ITAA 1997) is applicable where a person is a trustee of a deceased estate and, under the will of the deceased, acquires an ownership interest in a dwelling for occupation by an individual. Such an acquisition may be in pursuance of the will, but does not have to be by force of the will nor in strict conformity with it

Subsection 118-210(3) of the ITAA 1997 provides that if the trustee receives money or property from a CGT event happening to such a dwelling, the trustee does not make a capital gain or capital loss if the dwelling was the main residence of the individual from the time the trustee acquired an ownership interest in it until the time of the event.

For the purpose of this provision, only the CGT events listed in subsection 118-210(5) of the ITAA 1997 are relevant. One of the events listed is CGT event A1 which relates to the disposal of a CGT asset.

Application to your circumstances:

In your case, section 118-210 of the ITAA 1997 is applicable. As trustee of the deceased estate, you purchased a dwelling for occupation of your relative, in accordance with the deceased's will. You used funds from the deceased estate. You took into account the best interests of your relative. You purchased the dwelling in your name as a safeguard against it being sold or used as collateral by your relative and their partner.

Although the dwelling was in your name, you always believed the property belonged to your relative. You left the dwelling to your relative in your will in the event of your death.

Your relative and their partner used the dwelling as their main residence for its period of ownership. They paid for running expenses of the property including water, rates, electricity and repairs. You never used the dwelling for your personal purposes.

You and your relative decided to sell the dwelling and it was sold. A capital gain was made on sale.

According to subsection 118-210(3) of the ITAA 1997, you will not be liable for the capital gain made on sale of the dwelling as the individual (your relative) used the dwelling as their main residence from the time you acquired an ownership interest in it until the time of the event. In this case the event was the sale of the dwelling which was a CGT event A1. This is one of the relevant events for this provision.

In conclusion, you can disregard the capital gain on the sale of the dwelling.

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