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Edited version of private ruling

Authorisation Number: 1011560786200

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Ruling

Subject: Capital gains tax - Deceased estate - Right to occupy

Question

Is any capital gain made on the sale of the property disregarded in part?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Relevant facts and circumstances

The property was purchased by the deceased prior to 20 September 1985.

The property is less than two hectares in size.

The property was the deceased's main residence from prior to 20 September 1985 until their death sometime after 20 September 1985.

The property was not used to produce income prior to the death of the deceased and has and will not be used to produce income from the date of death of the deceased until settlement of sale of the property.

You have owned the property since the deceased passed away sometime after 20 September 1985.

The property has been the main residence of the deceased's adult child since the deceased's date of death. Firstly for a set period of years from the date of the deceased's death in accordance with the deceased's Will and then the set period was extended by you with the adult child's approval, to the date of settlement of the sale of the property. The extension of time was also in accordance with the terms of the deceased's Will.

For the purposes of this ruling the following will apply;

You have included copies of the following documents. These documents are to be read with and form part of the scheme for the purposes of this ruling:

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10,

Income Tax Assessment Act 1997 Section 115-5,

Income Tax Assessment Act 1997 Section 115-10,

Income Tax Assessment Act 1997 Section 115-15,

Income Tax Assessment Act 1997 Section 115-20,

Income Tax Assessment Act 1997 Section 115-25,

Income Tax Assessment Act 1997 Section 118-195 and

Income Tax Assessment Act 1997 Section 118-200.

Reasons for decision

Summary

Any capital gain made on the sale of the property will be disregarded in part.

Detailed reasoning

Full Exemption

Where your ownership interest in a dwelling devolved to you as trustee of a deceased estate and the deceased acquired the ownership interest before 20 September 1985 (pre-CGT) and the dwelling was the main residence of an individual who had a right to occupy the dwelling under the deceased's Will, for all of your ownership period, any capital gain arising from the disposal of the dwelling will be disregarded in full.

In this case the deceased's adult child will not occupy the dwelling for all of your ownership period, therefore a partial exemption will apply.

Partial Exemption

You get only a partial exemption (or no exemption) if:

You ownership interest in a dwelling devolved to you as trustee of a deceased estate, and;

The dwelling was the main residence of an individual who had a right to occupy the dwelling under the deceased's Will for part only of your ownership period.

The non-exempt portion of any capital gain is calculated as follows:

Capital gain X Non-main residence days

Total days

Capital gain is the amount that you made from the disposal of the dwelling before claiming any main residence exemption.

Non main residence days are the number of days that the dwelling was not the main residence of an individual who had a right to occupy the dwelling under the deceased's Will.

Total days are the number of days from the death of the deceased until settlement of the disposal of the property.

Notes for your information

You have acquired the property on the deceased's date of death for its market value as at the deceased's date of death.

As you have owned the dwelling for more than 12 months you can choose to use the discount method to calculate your net capital gain. The discount percentage of 50% is applied to the taxable portion (non exempt portion) of capital gain after you have offset any capital losses that you may have had in the income year that the CGT event occurs and then offset any unapplied net capital losses from earlier years. Generally this method enables you to reduce your capital gain by half.

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