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Ruling
Subject: CGT - deceased estate
Question and answer
Are there capital gains tax implications for you, as the beneficiary of a deceased estate, on the sale of a dwelling that was the main residence of the deceased, if the dwelling is occupied by a life tenant under the terms of the deceased's will?
No.
This ruling applies for the following periods:
Year ending 30 June 2013
The scheme commenced on:
1 July 2012
Relevant facts and circumstances
The property was purchased by the deceased in 1990.
The deceased and their spouse lived in the property until the deceased died.
The property was the deceased's main residence up until they died.
The deceased's spouse was granted life tenancy in the will of the deceased.
The spouse of the deceased continued to live in the property until they moved into a nursing home.
The spouse of the deceased will not be returning to the property due to ill health.
The deceased's spouse has been treating the property as their main residence while in the nursing home.
The property has remained vacant since the deceased's spouse moved into the nursing home.
You were the beneficiary of the property.
You have received no income from the property.
You have covered the costs of council rates and insurance on the property.
The property is on the market.
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
Capital Gains Tax (CGT) is the tax you pay on any capital gain you make. You may make a capital gain as a result of a 'CGT Event' (section 102-20) of the Income Tax Assessment Act 1997.
The most common CGT event happens if you dispose of an asset i.e. a dwelling to someone else, for example, if you sell the dwelling. The sale constitutes a CGT event A1 (section 104-10) of the ITAA 1997.
Special rules apply for assets acquired through a deceased estate where the asset was the main residence of the deceased.
If an individual inherits a deceased person's dwelling, they may be exempt or partially exempt when a CGT event happens in relation to the dwelling. The same exemptions apply if a CGT event happens in relation to a deceased's estate in which you are the trustee.
Generally, any capital gain or loss you make when a CGT event happens in relation to the dwelling is disregarded if any of the following:
· You disposed of the dwelling within two years of the person's death, or
· From the deceased's death until you disposed of the dwelling, the dwelling was not being used to produce income. For this period, the dwelling must have been 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
The beneficiary, if the dwelling was disposed of by the beneficiary.
(Section 118-195 of the ITAA 1997)
In your case, as the deceased's spouse had a right to occupy the dwelling under the terms of the will, any capital gain or loss made on the sale of the dwelling will be disregarded.
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