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Edited version of your private ruling
Authorisation Number: 1012562204064
Ruling
Subject: capital gains tax - deceased estate - right to occupy and disposal
Question: Is any capital gain or capital loss made upon disposal of the dwelling disregarded?
Answer: Yes.
This ruling applies for the following period
Year ended 30 June 2014
The scheme commences on
1 July 2013
Relevant facts and circumstances
The deceased died more than seven years ago and left a will.
Probate was granted shortly after the deceased's date of death.
The deceased's dwelling is located in an Australian city and was valued in the probate application.
The dwelling was purchased by the deceased and their spouse. The transfer of land was prior to 20 September 1985.
The title to the dwelling was registered prior to 20 September 1985.
The dwelling was their main residence until their respective deaths.
The deceased's spouse died more than ten years ago and the dwelling was transferred by survivorship to the deceased. The change of titled was registered the following year.
Upon death of the deceased, the title was transferred into the names of the executors, and was registered several years later.
Clause x of the will provides person A the right to reside in the dwelling. The right ceases if clauses W, Y and Z) occur, being their death; they no longer wish to use the dwelling as their residence; or the first to happen a specified number of years from the date of grant of probate in respect of the will or when the named grandchild (child A) ceases full time secondary school education. Child A will remain in full time secondary school education until 20XX.
When the dwelling was disposed of, the proceeds were distributed as part of the residuary estate detailed in clause B of the will.
Person A exercised the right to reside in the dwelling on a specified date and it was their main residence.
The dwelling has now been disposed of as person A no longer wishes to use it as their main residence.
The right to reside in the dwelling terminated on the disposal of the dwelling.
The dwelling was disposed of by contract this year.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 118-110
Income Tax Assessment Act 1997 Section 118-130
Income Tax Assessment Act 1997 Section 128-20
Income Tax Assessment Act 1997 Section 118-195.
Reasons for decision
The most common CGT event (CGT event A1) happens if you dispose of an asset to someone else. You dispose of an asset when a change of ownership occurs from you to another entity. The time of the event is when you enter into the contract for the disposal or if there is no contract when the change of ownership occurs.
CGT event A1 occurred upon the disposal of the dwelling.
Deceased estate
A capital gain or capital loss that either a beneficiary or trustee makes on the disposal of a dwelling that was the deceased's main residence just before they died is disregarded if:
· the beneficiary or LPR disposed of their ownership interest within two years of the deceased's death; or
· from the deceased's date of death until the ownership interest ends the dwelling was the main residence of one or more of the following persons:
o the spouse of the deceased immediately before death;
o an individual who had a right to occupy the dwelling under the deceased's will; or
o the individual who brought about the CGT event and the ownership interest in the dwelling had passed to that individual.
In your situation, the deceased, resided in the dwelling as their main residence until the date of their death. Person A, as an individual who had a right to occupy the dwelling under the deceased's will, resided in the dwelling from a specified date.
The dwelling has been person A's main residence for the entire period that they have had the right to reside in the dwelling. Person A vacated the dwelling when it was disposed of.
Therefore, any capital gain or capital loss made on the disposal of the dwelling is disregarded.
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