Edited version of private ruling

Authorisation Number: 1011880157334

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Ruling

Subject: Capital gains tax - deceased estate - disposal of main residence and investment property

This ruling applies to the beneficiaries of the trust and to the trustee and to any future trustees, for as long as the ruling remains current.

Question 1: Is the capital gain made on the disposal of property A disregarded?

Answer: Yes.

Question 2: Is the capital gain made on the disposal of property B disregarded?

Answer: Yes.

This ruling applies for the following period

30 June 2011

The scheme commenced on

1 July 2010

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.

The deceased acquired a property (property A) before 20 September 1985.

The deceased and their spouse established property A as their main residence.

In 19XX the deceased inherited a vacant block of land (property B) from their parent's estate.

Property B was registered in the deceased's name.

The deceased and their spouse built a dwelling on the vacant land at property B.

Prior to 20 September 1985, the deceased transferred a 50% interest in property B to their spouse. The deceased and their spouse had joint ownership.

The deceased and their spouse moved into property B and established it as their main residence.

Property A became an investment property.

In late 1990 the deceased's spouse died.

Early 1991 the title of property B was transferred into the deceased's name.

The deceased continued to reside at property B.

In mid 2010, the deceased fell and suffered injuries which required them to be treated at a hospital. The deceased was released from hospital the same day.

The follow day the deceased had another fall and was taken by ambulance to a hospital where they were admitted into hospital.

The deceased remained in hospital for approximately a month, then they were transferred to care facility where they continued to receive medical treatment with the view to their rehabilitation and their subsequent return to property B.

The deceased's clothing, personal effects, household contents and other property remained in their home at property B. The deceased was looking forward to returning to their home as soon as they are able to do so.

The deceased died a month later.

Under the deceased's Will dated mid 2010, there are a specified number of beneficiaries.

Late 2010, the Supreme Court of a state in Australia in its Probate Jurisdiction granted probate.

You in your role as executors disposed of property A in early 2011, for $X.

You in your role as executors disposed of property B in early 2011, for $X.

A capital gain was made on both the disposal of property A and property B.

The estate is full administered and all debts and legacies have been paid or provided for in full and the residue has been determined.

The estate was fully administered prior to 30 June 20XX.

The balance of the proceeds will be distributed to the beneficiaries according to the deceased's Will.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 118-195
Income Tax Assessment Act 1997 Section 108-7
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 128-15

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

When a person dies, a capital gain or capital loss from a capital gains tax (CGT) event happening to a CGT asset owned by the deceased, just before death, is generally disregarded.

Where the asset devolves to the executor or passes to a beneficiary of the deceased estate, the executor or beneficiary is taken to have acquired the asset on the day the person died. 

For a dwelling acquired by a deceased before 20 September 1985, you disregard the capital gain or capital loss made on its disposal if:

· your ownership interest ends within two years of the deceased's death, or

· the dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of:

· the spouse of the deceased immediately before death (except a spouse who was living permanently separately and apart from the deceased)

· 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.

Property A

The deceased acquired their ownership interest property A prior to 20 September 1985, and it was disposed of within two years of their death.

Therefore, the capital gain made on the disposal of property A is disregarded.

Property B

Where the deceased acquired their ownership interest in a dwelling on or after 20 September 1985, and the dwelling was the deceased's main residence just before their death that was not being used for income producing purposes at that time, you disregard the capital gain or capital loss made if:

· the dwelling was from the deceased's date of death until your ownership interest ends, the main residence of one or more of:

· 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);

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

· an individual, as a beneficiary, if they dispose of the home as a beneficiary, or

· the ownership interest in the dwelling ends within two years of the deceased's death.

The deceased originally acquired their interest in property B in 19XX upon the death of their parent. The deceased in 1983 transferred a 50% interest to their spouse.

If joint tenants own a CGT asset and one of them passes away, the interest of the deceased joint tenant in the asset is deemed to be acquired by the surviving joint tenant on the date the deceased joint tenant passed away.

The deceased had two separate interests in property B, the first being a 50% interest they acquired in 19XX from their parent's estate. The second interest was acquired on late 1990 upon the death of the deceased's spouse.

Property B has been the deceased's main residence since before 20 September 1985 and it continued to be their main residence until their death and it was disposed of within two years of their death.

Therefore, the capital gain made on the disposal of property B is disregarded.

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