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Edited version of private ruling
Authorisation Number: 1011766730164
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Ruling
Subject: Capital gains tax - main residence not disposed of within two years of the deceased's date of death
Question:
Is the capital gain made on disposal of the deceased's main residence more than two years after the deceased's date of death disregarded?
Answer: No.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
Your late relative (the deceased) owned a property (the property).
The property was the deceased's main residence at the time of their death.
The deceased died in early 2009.
You and your sibling were the two beneficiaries, with equal shares of the deceased's main residence.
Mid 2010, you and your sibling entered into a Contract of Sale for the disposal of the property for a specified sum.
Early 2011 settlement occurred.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 118-195
Income Tax Assessment Act 1997 Section 128-15
Reasons for decision
If you acquire an asset owned by a deceased person as a beneficiary you are taken to have acquired the asset on the day the person died.
You are taken to have acquired your interest (50%) in the property on the deceased date of death in 2009.
When you inherit real estate that was acquired by the deceased prior to 20 September 1985, you are eligible for a full exemption from capital gains tax (CGT) on the disposal of the property, provided you either:
· dispose of your ownership interest within two years of the deceased's death, that is settlement occurs within two years, or
· the property was, from the deceased's death until your ownership interest ends, the main residence of one or more of:
o the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased)
o an individual who had a right to occupy the dwelling under the deceased's will, or
o you as a beneficiary, if you disposed of the dwelling as a beneficiary.
For the purpose of the main residence exemption, the legal ownership ceases on the date of settlement not the date the contract for sale was entered into.
In your case, you cannot disregard the capital gain made on the disposal of your interest in the property because neither of the above conditions was met. The property was disposed of more than two years after the deceased's date of death. Also, the property was not your main residence during your ownership period.
Whilst we appreciate your situation, we have no discretion to extend the two year period.
Therefore, you will need to include your share of the capital gain in your income tax return.