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Subject: Capital gains tax - Deceased estate - Inherited dwelling - Disposal
Question:
Is the capital gain made on the disposal of the dwelling disregarded?
Answer:
No.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
6 April 2013
Relevant facts
The deceased purchased the dwelling prior to 20 September 1985
The deceased passed away a number of years after the dwelling was acquired
You have been appointed as a trustee of the deceased's estate
No one has a right to occupy the dwelling under the deceased's will
You will sell the dwelling as trustee and not as a beneficiary
Settlement of the dwelling will occur more than two years after the deceased's date of death.
Relevant Legislative provisions
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 118-195.
Income Tax Assessment Act 1997 Section 118-200.
Reasons for decision
Capital gains tax (CGT) is the tax you pay on certain gains you make. You may make a capital gain or a capital loss as a result of a CGT event (section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997)).
The most common event happens if you dispose of an asset to someone else, for example if you sell your dwelling. The sale of your dwelling constitutes CGT event A1 (section 104-10 of the ITAA 1997).
Any capital gain or capital loss you make from a CGT event that happens in relation to a dwelling that has passed to you as a beneficiary in a deceased estate is disregarded if the deceased acquired the dwelling before 20 September 1985 and you disposed of your ownership interest within two years of the persons death (section 118-195 of the ITAA 1997).
Therefore, if the dwelling is not disposed of within the two years from date of death, any capital gain or capital loss realised on your interest in the dwelling will be assessable. There is no discretion within the Income Tax Assessment Act 1997 for the Commissioner to extend the two year period.
In your case, as you will dispose of your interest in the dwelling as trustee of a deceased estate, after two years from the date of the deceased's death, you are not entitled to a main residence exemption.