Edited version of your private ruling

Authorisation Number: 1012602145433

Ruling

Subject: Capital gains tax - deceased estate - main residence

Question 1:

Can you elect to continue the deceased's property A to be the deceased's main residence?

Answer:

Yes.

This ruling applies for the following period

Year ended 30 June 2014 to 30 June 2016

The scheme commences on

1 July 2013

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The deceased died approximately X months ago.

The executors of the deceased estate are one of the deceased's children (child A) and yourself.

The deceased owned and held two properties which they resided in at the time of their death.

These properties consisted of:

• property A and

• property B.

The deceased also owned a holiday house.

The deceased had owned and held several properties located within and outside of Australia concurrently as their places of residence.

The deceased held the following properties concurrently as places of residence:

• property C in country A from the middle of X's to approximately X years ago when it was disposed of

• property D in country B from the middle of X's to approximately Y years when it was disposed of

• property E in from late X's to approximately X years ago when it was disposed of

• property F from late X's to approximately Z years ago when it was disposed of

• property A, the deceased acquired the apartment approximately V years ago, and

• property B, the deceased acquired this property approximately X years ago.

Approximately V years ago the deceased handed all responsibilities for the administration of their wealth and lifestyle to their children, child J and child B. From this time onwards, all administration (including the changing of mailing addresses) was done with the view of providing convenience to child J and child B.

Approximately V years ago, child B changed the deceased's postal address to their mailing address for reason of convenience to themself. The deceased's mail was delivered to this address for a period of approximately Y years.

Approximately X years ago the deceased's mailing address was changed to a post office box pursuant to instructions from their children. The reason for change was due to child J and child B were travelling often and it was a more reliable and accessible mailing address.

The deceased's accountant, would collect, scan and email the deceased's mail to their child J and child B for action daily when they were travelling.

The deceased regarded property A and property B as important properties which supported their lifestyle. The deceased travelled between each of these two properties.

Property A and property B were never used to produce assessable income.

As at the deceased's date of death, property A was registered as the deceased's principle place of residence for the relevant state's land tax purposes.

As at the deceased's date of death, property B was registered as the deceased's main residence for the relevant state's land tax purposes.

The deceased did not make the decision to register property B as their principle place of residence for relevant state's land tax purposes. It was child J who had made the decision to register the property as the deceased's place of residence.

There has been no formal notice by the deceased in electing their main residence for capital gains tax (CGT) purposes.

The deceased told their children that in spite of their multiple places of residence, they had always regarded property A as their main residence. The deceased had chosen as specified city as it was where they was born, raised, succeeded in business, lived their life and as an admirer of certain arts, the city had locations of experiences they enjoyed.

The deceased told their children that they regarded property B as a holiday destination.

Before the deceased's final years, they spent more time at property A than at property B. The deceased used property B as one of their seasonal destinations.

In the deceased's final years, they became less mobile and required care. The deceased increasingly spent more time at property B because their carers and their child J and child B resided in the same state.

At the time of the deceased's date of death, the deceased held more personal belongings at property A than property B.

The deceased was an collector, and their collection was extensive in property A whereas property B only housed a few pieces of their collection.

The deceased maintained their primary personal belongings in property A.

Approximately X months ago, the deceased suffered a medical event and required hospitalisation and intensive care.

The deceased moved into a nursing home and they stayed there until their death.

The executors of the deceased estate have made the election for property A to be the deceased's main residence for their entire ownership period.

The executors of the deceased estate will dispose of property A and property B within two years of the deceased's date of death.

You have provided documentation to support your application and this documentation is to be read with and forms part of your application for the purposes of this ruling.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Section 118-145

Income Tax Assessment Act 1997 Section 118-195

Income Tax Assessment Act 1997 Section 128-15

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

A CGT event A1 occurs when you dispose of a CGT asset. The time of the event is when you enter into the contract for the disposal or if there is no contract when the change of ownership occurs.

CGT event A1 will occur upon the disposal of property A and property B. 

Deceased estate

If you acquire an asset owned by a deceased person as their executor or beneficiary, you are taken to have acquired the asset on the day the person died.

In your case, you are taken to have acquired your interests in property A and property B on the deceased's date of death.

If you inherit a deceased person's dwelling, you may be exempt or partially exempt when a CGT event happens to it.

A capital gain or capital loss made from the disposal of a dwelling acquired by the deceased after 20 September 1985, is disregarded if: 

• the property was the main residence of the deceased immediately before their death and not being used to produce income,

• the property is disposed of within two years of the death of the deceased, or

• from the time of death until its disposal of it, the property was the main residence of the deceased's spouse or an individual who had a right of occupancy under the will.

If you own more than one dwelling during a particular period, only one of them can be claimed as your main residence at any one time.

The exemption to this rule is if you are moving from one main residence to another. In this case you can treat two dwellings as you main residence, but not for a period exceeding six months, and not if the original dwelling was used for income producing purposes in the last twelve months just proceeding its disposal.

In your case, the deceased owned two dwellings, which they used as their main residences and neither dwelling was used to produce assessable income.

You can make the choice that a dwelling that was your main residence continues to be treated as your main residence after you cease living in it. If the dwelling is used to produce income, there is a six year time limit on the continuing main residence status. If you make this choice you cannot treat any other dwelling as your main residence for that period (except for a limited time if you are changing main residences).

You make the choice for the income year you enter into the contract to dispose of the property.

As an executor of the deceased's estate, you are entitled to make this choice on their behalf.

You have made an election to treat the deceased's property A as their main residence up until their date of death. Property A will be disposed of within two years of deceased's death.

Therefore, any capital gain or capital loss made on the disposal of the property A is disregarded.

The normal CGT rules will apply upon the disposal of property B.

Further information on how to calculate the capital gain or capital loss made on the disposal of property B is available on our website (www.ato.go.au).