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Edited version of your private ruling
Authorisation Number: 1012559983196
Ruling
Subject: Capital gains tax
Question
Does capital gains tax (CGT) apply to the sale of the property?
Answer
Yes.
This ruling applies for the following period
Year ending 30 June 2014
The scheme commences on:
1 July 2013
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 arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:
· the application for private ruling,
· the letter of probate,
· the last will and testament of the deceased,
· the inventory of property, and
· the contract of sale.
The deceased purchased a property prior to 20 September 1985.
The deceased lived in the property and it was their main residence until they passed away.
The deceased had three relatives.
Two of these relatives are the executors of the Estate.
Probate was granted.
The third relative was living with the deceased at the main residence.
A clause of the will directed the executors to sell the real property of the estate. A one half share of the proceeds was to be used to purchase a home for occupation by this relative during their life time.
This relative continued living in the property until they passed away.
The property was sold more than 2 years after the deceased passed away.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 118-195(1)
Reasons for decision
CGT is the tax that you pay on certain gains you make. You make a capital gain or capital loss as a result of a CGT event, happening to an asset in which you have an ownership interest.
The time of the CGT event is when you enter into the contract for the disposal, or if there is no contract, when the change of ownership occurs.
Subsection 118-195(1) of the ITAA 1997 states that if you own a dwelling in a capacity as trustee of a deceased estate, then you are exempt from tax on any capital gain made on the disposal of the property if:
· the property was acquired by the deceased before 20 September 1985, and
· your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances) 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 the death or
- an individual who had a right to occupy the dwelling under the deceased's will, or
- if the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary, that individual.
In this case, the property was acquired by the deceased before 20 September 1985. The property was sold more than 2 years after the deceased passed away.
A relative of the deceased, continued living in the property after the deceased passed away. There was no provision in the will that allowed the relative to live in the property. The will required the executors to dispose of the property and use a portion of the proceeds to purchase a new main residence for the relative.
As the conditions in subsection 118-195(1) have not been satisfied the estate will be liable for capital gains tax on the sale of the property.
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