Edited version of private ruling

Authorisation Number: 1011543456441

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Ruling

Subject: Capital gains tax (CGT) - Deceased Estate

Will the capital gain made on the disposal of your dwelling be disregarded?

No.

This ruling applies for the following period:

Year ended 30 June 2009

The scheme commences on:

1 July 2008

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

Sometime after 20 September 1985 your late spouse was diagnosed with a terminal illness.

You approached your solicitors as your spouse wished to draw up a new Will.

Your spouse died prior to the new Will being drawn up.

You were made executor of the estate and you were the principal beneficiary under the Will.

The property was transferred into your name. Your spouse had inherited this dwelling from their parent's estate.

Your spouse's parent purchased the dwelling sometime after 20 September 1985. It was not their main residence.

At no stage was the dwelling your spouse's main residence.

Your spouse's last wishes were for the dwelling to be given to their children and so you honoured this wish transferring the dwelling to them.

Your accountant advised you that you had now incurred capital gains tax (CGT) as a result of the transfer of the dwelling to your children.

This capital gain was included in your assessable income in the year in which the CGT event occurred. This in turn affected your eligibility for Family Tax payment (FTP).

You spent a great deal of time caring for your dying spouse and your children so you did not earn enough money to qualify for the $900 tax bonus and due to the capital gain you incurred, you were not eligible for the $1,000 bonus payment.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 118-195.

Reasons for decision

Detailed reasoning

You make a capital gain or capital loss if a capital gains tax (CGT) event happens. The most common event occurs if you dispose of a CGT asset, such as selling your home or investment property. This is called CGT event A1.

A beneficiary or a trustee of a deceased estate can disregard a capital gain or capital loss when a CGT event happens to a dwelling acquired by the deceased person on or after 20 September 1985, if that dwelling was the deceased's main residence just before they died and not being used to produce assessable income, and:

1. the ownership interest of the beneficiary or trustee ends within two years of the deceased's death or

2. the dwelling was, from the deceased's death until the ownership interest of the beneficiary or trustee ends, the main residence of one or more of:  

· the spouse of the deceased immediately before the death, or

· an individual who had a right to occupy the dwelling under the deceased's will, or

· an individual beneficiary to whom the ownership interest passed and that person disposed of the dwelling in their capacity as beneficiary.

In your case, the dwelling was not your late spouse's main residence just before their death. Therefore, you as beneficiary of her estate, cannot disregard the capital gain made on the disposal of the dwelling.

Note:

Tax Bonus Payment

The Tax Bonus Payments were part of the Australian Government initiative to assist households and support economic growth in 2008-09.

The Australian Tax Office used clients' 2007-08 income tax return to determine if they were eligible for the payment and how payments were to be received.

To be eligible for the tax bonus payment:

· you must have been an Australian resident for tax purposes in 2007-08

· you must have lodged a 2007-08 tax return by 30 June 2009, unless we granted you a deferred lodgment date before 18 February 2009

· your 2007-08 taxable income must have been $100,000 or less and,

· your 2007-08 adjusted tax liability must have been greater than zero

Unfortunately, as you had an adjusted tax liability of zero, you did not meet the criteria listed above and therefore were not eligible for the Tax Bonus.

If you're objecting to the law itself, for example, you are objecting to the eligibility criteria, you cannot lodge an objection with the Tax Office. The Tax Office was administering the law on behalf of the Australian Government and cannot comment on Government policy.

If you wish to object to the law itself you will need to contact your local federal member of parliament.

Family Tax Payment

The Family Tax Payment is administered by Centrelink. To discuss your request for the payment to be claimable for a particular income year, please contact the Family Assistance Office on 13 61 50. The Family Assistance Office line is open for calls from 8am to 8pm local time, except on Public Holidays.

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