Edited version of private advice

Authorisation Number: 1052102650535

Date of advice: 8 May 2023

Ruling

Subject: CGT - main residence exemption

Question

Will the full main residence exemption apply to the disposal of the property?

Answer

No

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The deceased passed away

Relevant facts and circumstances

The deceased passed away in XXXX.

The deceased owned a property (The property). The property was acquired in XXXX and the deceased considered the property their main residence until they passed in XXXX.

The property was located on less than two hectares of land and has never been used for income producing purposes.

The deceased provided a life tenancy for a relative who was also named as Trustee of the deceased's estate.

The deceased's will named the remainder beneficiaries of the estate as XXXX (1/3 share) and (2/3 share).

The life tenant and their spouse (a beneficiary of the estate) occupied the property until death. However the spouse continued to reside in the property as a beneficiary under the estate until they moved to a nursing home.

At all times the beneficiary considered the property to be their main residence.

The title deed was changed to the executor's name as personal representative to the estate to enable the sale of the property.

The property was placed on the market and settlement occurred.

From the time that the deceased passed, the property was used only as the main residence by a person who was a beneficiary of the estate and disposed of the property as a beneficiary.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 118-195

Reasons for decision

Summary

You are not entitled to a full main residence exemption in relation to the sale of the property due to Person A using it as their main residence during part of your ownership period.

Detailed reasoning

You are entitled to a full main residence exemption on the sale of the property if the conditions in section 118-195 of the ITAA 1997 are satisfied. These conditions are not satisfied because it was not the main residence of a relevant individual from the date that Deceased passed away until your ownership period ended.

The relevant individuals identified in item 2, column 3 of the table in section 118-195 of the ITAA 1997 are:

•         the spouse of the deceased

•         an individual with a right to occupy the dwelling under the will of the deceased, and

•         if the property is sold by an individual to whom the ownership interest passed as a beneficiary - that individual.

The beneficiary is not an individual referred to in item 2, column 3 of the table in section 118-195 of the ITAA 1997 because:

•         The Beneficiary was the relative of deceased and not a spouse

•         The Beneficiary did not have a right to occupy the property, they were only listed as a beneficiary.

•         The property was sold by you the trustee of deceased estate and not by the beneficiary.

Consequently, there will be a capital gains implication when the property is sold as Beneficiaries main residence days do not count towards the property's exemption.

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