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Edited version of private advice
Authorisation Number: 1012632655179
Ruling
Subject: Capital gains tax
Question and answer
Are you required to include any capital gain or capital loss in your income tax return upon the disposal of your share of the property?
No.
This ruling applies for the following periods:
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commenced on:
1 July 2013
Relevant facts and circumstances
Individual X acquired the property some time before 1985 and lived in the dwelling as their main residence until their death.
The property was left Individual Y who lived in the dwelling as their main residence prior to Individual X's death until Individual Y's death.
Under Individual Y's will, the property was to be divided equally between you and two other individuals in equal shares.
You lived in the property from some time prior to Individual Y's death until 20XX, just prior to it becoming income producing.
You have elected to continue to treat the property as your main residence until it is sold.
You intend to dispose of your interest in the property within six years of it becoming income producing. Another beneficiary intends to purchase your interest in the property. All transactions will be dealt with as arm's length transactions.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 106-50.
Income Tax Assessment Act 1997 Section 118-145.
Income Tax Assessment Act 1997 Section 118-195.
Reasons for decision
Under section 118-195 of the ITAA 1997, a capital gain or capital loss you make from a CGT event that happens in relation to a dwelling or your ownership interest in it is disregarded if the deceased acquired the ownership interest on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death and was not then being used for the purpose of producing assessable income, and the dwelling was, from the deceased's death until your ownership interest ends, the main residence of the beneficiary who brought about the CGT event.
In your case, the dwelling was Individual Y's main residence just before their death and at that time was not being used for the purpose of producing assessable income. It was your main residence from prior to Individual Y's death until 20XX. Although the property has been income producing since soon after you moved out, you have elected to continue to treat the dwelling as your main residence under section 118-145 of the ITAA 1997. As the property will be sold within six years of it becoming income producing, you are therefore entitled to a full main residence exemption.
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