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Edited version of your written advice
Authorisation Number: 1012725351835
Ruling
Subject: CGT
Question and Answer:
Is there a capital gains tax event for you when you acquire the dwelling from the trustee of the deceased estate?
No
This ruling applies for the following period:
Year ended 30 June 2015
The scheme commenced on:
1 July 2014
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 purchased a dwelling before 20 September 1985.
The deceased used the dwelling as their main residence until their death on date M after 20 September 1985.
According to the deceased's will, D has a life interest in the dwelling. The will specifies the dwelling is to be distributed to the children of D (remaindermen) in equal shares as tenants in common, provided they have reached the age of 18.
You are one of the remaindermen.
Since the death of the deceased, D has used the dwelling as their main residence and has not used the dwelling to earn assessable income.
The trustee of the deceased's estate, with permission of the life tenant, and the remaindermen proposes to sell the dwelling at its market value and then distribute the proceeds between the life tenant and the remaindermen (in proportions yet to be agreed).
The dwelling will be sold to you before 30 June 2015.
The dwelling will remain the life tenant's main residence until sale.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 102-5.
Income Tax Assessment Act 1997 Section 102-20.
Income Tax Assessment Act 1997 Section 104-10.
Income Tax Assessment Act 1997 Section 128-15.
Income Tax Assessment Act 1997 Section 128-20.
Reasons for decision
You make a capital gain or a capital loss if and only if a capital gains tax (CGT) event happens to a CGT asset.
CGT event A1 happens if you dispose of a CGT asset (section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997)). A CGT asset is any kind of property or a legal or equitable right that is not property (section 108-5 of the ITAA 1997).
The dwelling in question is a CGT asset. A CGT event will happen to the parties who dispose of the dwelling, however, as you will be acquiring dwelling, there is no CGT event for you. You will become the legal owner of the dwelling.
Life interest and remainder interest in an asset
As a result of the death of the deceased, two separate interests in the dwelling in question were created:
• D's interest as a life tenant; and
• D's children's interest in the remainder, of which you are one of the children.
For CGT purposes, these separate interests in the property are assets in their own right.
Taxation Ruling TR 2006/14 deals with the capital gains tax consequences of creating and dealing in life and remainder interests.
It states that life interests and remainder interests are terms used to describe the interest that an entity has as either a beneficiary of a trust (equitable interest).
As the deceased purchased the dwelling prior to 20 September 1985 you are deemed to have acquired your share of the property on the date of their death on date M. Taxation Determination TD 93/37 confirms that if the deceased dies on or after 20 September 1985, the remainderman is taken to have acquired the asset on the date of death of the deceased. However, D was given life tenancy under the terms of the will the asset did not pass to you. You were not to become absolutely entitled to the dwelling until D passes away, as per section 128-20 of the ITAA 1997.
In your situation the trustee of the deceased's estate, with permission of the life tenant, and the remaindermen proposes to sell the dwelling at its market value and then distribute the proceeds between the life tenant and the remaindermen (in proportions yet to be agreed).
As you will be acquiring the dwelling, this will not trigger a CGT event for you.