1051804528360 | Legal database

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Edited version of private advice

Authorisation Number: 1051804528360

Date of advice: 11 February 2021

Ruling

Subject: Capital gains tax implications upon the sale of a deceased estate main residence dwelling

Question 1

Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act (ITAA1997) and allow an extension of time for the Trustee of the Testamentary Trust A to dispose of its ownership interest in the dwelling?

Answer

Yes. Having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time. The will was challenged, a court ordered amendment granted a life interest over the property, delaying its disposal. Further information about this discretion can be found by searching 'QC 52250' on www.ato.gov.au

Question 2

Can the capital gain or loss made by the executor of the deceased estate as a result of the court ordered transfer of the property, be disregarded under section 118-195 of the ITAA 1997?

Answer

Yes. The main residence exemption applies. The life interest used the property as their main residence from the date of the testator's death until the ownership interest ended. Further information can be found by searching 'QC 52247' on www.ato.gov.au

Question 3

Will the Commissioner exercise his discretion under subsection 118-195(1) of the ITAA1997 and allow an extension of time for the Trustee of the Testamentary Trust B to dispose of its ownership interest in the dwelling?

Answer

Yes. Having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time. The life interest given in the court ordered amendment to the will, prevented the sale of the property until the life interest passed away. Further information about this discretion can be found by searching 'QC 52250' on www.ato.gov.au

This ruling applies for the following periods:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The testator acquired the ownership interest in the property before 20 September 1985.

The testator passed away leaving a will.

The property was the testator's main residence by choice immediately before death.

Probate was granted to the executors.

One of the individual beneficiaries (Beneficiary A), was under administration by the state trustee.

The will was challenged under testator family maintenance by the state trustee, in order to provide further provision for Beneficiary A.

The court ordered that the property be transferred as follows;

a. One half to executors of the deceased estate, to be held as a life interest for the benefit of Beneficiary A (Testamentary Trust A); and

b. One half to be held by the state trustee, for the benefit of Beneficiary A, and on his death, the trust vesting with the remainderman (Testamentary Trust B).

The property title was registered with one-part tenants in common to each, the state administrator and the executors for the deceased estate.

The life tenant beneficiary passed away.

The property was used as the principal place of residence by the life tenant during the period from testator's death until the date the life tenant passed away.

The property was sold at auction and settled shortly after.

Relevant legislative provisions

Section 118-195 of the Income Tax Assessment Act 1997

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