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Edited version of private ruling
Authorisation Number: 1011754991193
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Ruling
Question
Are you excluded from capital gains tax, for the proceeds of sale of the property, under the main residence exemption?
Answer: Yes
This ruling applies for the following period
1 July 2010 to 30 June 2011
Relevant facts and circumstances
Before 20 September 1985 the taxpayer purchased a property.
In xx the taxpayer passed away.
At the time of the taxpayer's death the property was their main residence and not used for income producing purposes.
In xx probate was granted.
Under the Will the property was devised to one of the taxpayer's family members, absolutely, and they were entitled to occupy the property.
The taxpayer's family member occupied the property, as their main residence, from the time of the taxpayer's death till the settlement of the property.
In xx the property was sold under contract.
In xx the settlement of sale for the property concluded.
The sale of the property was more than two year from the date of death of the taxpayer.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Subsection 108-5(1)
Income Tax Assessment Act 1997 Section 118-195
Income Tax Assessment Act 1997 Section 128-10
Income Tax Assessment Act 1997 Subsection 128-15(2)
Reason for Decision
Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) specifies that a Capital Gains Tax (CGT) event A1 happens if you dispose of a CGT asset. You dispose of a CGT assets if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. Further, the capital gain or capital loss is made at the time of the event.
A CGT asset is any kind of property (e.g. land and buildings) or legal or equitable right that is not property (subsection 108-5(1) of the ITAA 1997).
Assets acquired through a deceased estate
Division 128 of the ITAA of the 1997 contains rules that apply when an asset owned by a person just before they die, passes to their legal personal representative (LPR) or beneficiary in a deceased estate.
Section 128-10 of the ITAA 1997 provides that when a person dies, that person disregards a capital gain or loss from a CGT event happening to a CGT asset the person owned just before their death.
Where the asset devolves to the LPR or passes to a beneficiary of the deceased estate the LPR or beneficiary is taken to have acquired the asset on the day the person died. Regardless of the actual date that the legal title in the property passed (subsection 128-15(2) of the ITAA 1997).
The deceased acquired the dwelling before 20 September 1985
Under section 118-195 of the ITAA 1997 you may have an ownership interest in a dwelling that passed to you as a beneficiary in a deceased estate or you may have owned it as a trustee of deceased estate.
In either case, you disregard any capital gain or capital loss you make from a CGT event that happens to a dwelling if either of the following applies:
· You dispose of your ownership interest within two years of the person's death - that is, if the dwelling was sold under a contract, settlement occurred within two years. This exemption applies whether or not you used the dwelling as your main residence or to produce income during the two-year period. We have no discretion to extend the two year period.
Or
· From the deceased's death until you disposed of your ownership interest, the dwelling was not used to produce income and was the main residence of one or more of:
o A person who was the spouse of the deceased immediately before the deceased's death (but not a spouse who was permanently separated from the deceased)
o An individual who had a right to occupy the home under the deceased's Will or
o You, as a beneficiary, if you disposed of the dwelling as a beneficiary.
Application to your circumstances
The property is a pre-CGT asset and the family member living in the property had a right to occupy the home under the deceased's Will. Therefore under section 118-195 of the ITAA 1997 you are entitled to the main residence exemption.
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