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Edited version of private ruling
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Ruling
Subject: Deceased estate: Main residence: Adjacent land
Question and Answers
Is land sold at a different time to a main dwelling entitled to the main residence exemption from Capital Gains Tax?
No
This ruling applies for the following period
Period ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts and circumstances
The testator purchased a residential home after XX September 19XX (Property A).
Following the purchase of Property A, The testator purchased a property on a separate title (Property B) with a garage on it.
Property B is adjacent to Property A.
The testator passed away.
Property B was sold following probate of the testator's Will.
Property A was sold X weeks after Property B.
Relevant legislative provisions
Income Tax Assessment Act 1997
Section 118-120
Section 118-195
Reasons for decision
The extension of main residence exemption to adjacent land only applies to land that is adjacent to a dwelling:
· if the same CGT event happens to the land (or the taxpayer's ownership interest in it) as happens in relation to the dwelling (or the taxpayer's ownership interest in it); but only
· to the extent that the adjacent land was used by the taxpayer primarily for private or domestic purposes in association with the dwelling.
Section 118-120 of the Income Tax Assessment Act 1997 (ITAA 1997) extends the CGT main residence exemption to adjacent land and to certain structures associated with dwellings, when specified conditions are satisfied. The section has the effect of treating the adjacent land or the structure as if they were a dwelling, thus extending a CGT exemption under section 118-195 of the ITAA 1997 to any capital gains or losses from a CGT event affecting such land or structure.
As the sale of Property B preceded the sale of the main residence, the extension of main residence under section 118-120 of the ITAA 1997 will not apply.
There is no other provision that operates to disregard a capital gain in these circumstances.