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Edited version of your written advice
Authorisation Number: 1012778695766
Ruling
Subject: capital gains tax
Questions and answers
1. Are you liable to pay Capital gains tax on your share of an inherited property if it is not sold within two years of the date of death of the deceased ?
Yes.
2. Will the first element of the cost base be the market value of the inherited property at the date of the deceased's death?
Yes.
3. Are you entitled to a partial main residence exemption on your share of the inherited property?
Yes.
This ruling applies for the following period:
Year ending 30 June 2015
Year ending 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
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.
Your parents purchased the property after 1995 as joint tenants for $X.
Parent A died first and parent B died a while after.
Parent B was in a nursing home for a number of years prior to their death and elected to treat the property as their main residence for the period they were in care under continuing main residence provision.
You received a share in the property when parent B died.
The property is to be sold, however at this stage there is uncertainty as to when this will occur.
The property will remain vacant and will not be used to produce assessable income.
The property is less than 2 hectares in size.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Subsection 118-195(1).
Reasons for decision
A person makes a capital gain or a capital loss if and only if a capital gains tax (CGT) event happens to a CGT asset (section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997)).
Generally, assets a person inherits through a deceased estate are acquired on the date of death (section 128-15 of the ITAA 1997). Therefore, the trustee and beneficiaries are taken to have acquired their share of the estate on the date of parent B death.
The first element of the cost base of an interest in a dwelling that was the main residence of the deceased just before their death, the dwelling was not used to produce assessable income and the land does not exceed 2 hectares is the market value of the dwelling on the deceased's date of death (section 128-15(4) of the ITAA 1997). Which will be the date of death of parent B.
Subsection 118-195(1) of the ITAA 1997 allows a trustee of a deceased estate to disregard a capital gain or loss from a dwelling that a deceased person acquired after 1996 if:
• The trustees ownership interest in the dwelling ends within two years of the deceased persons death, or
• from the deceased's death until the trustees ownership interest ends (the trustee's ownership period), the dwelling was not used to produce income and it was also the main residence of one or more of the following persons:
• the spouse of the deceased immediately before death
• an individual who had a right to occupy the dwelling under the deceased's will, or
• an individual who brought about the CGT event and the ownership interest in the dwelling had passed to that individual as beneficiary.
The ownership interest of a beneficiary or trustee commences on the date of death of the deceased (section 128-15 of the ITAA 1997) and ends on the disposal of the dwelling.
A full main residence exemption will only be available if the dwelling was the main residence of one of the specified individuals during the trustee's ownership period for the entire period.
If the property is not sold within the two year time period under section 118-195 a partial main residence exemption will apply.
The capital loss or gain is calculated using the following formula:
Capital gain or loss multiplied by Non main residence days* divided by Total days in your parents and the trustees ownership period. (* non main residence days are the number of days where a dwelling was not occupied as the deceased's main residence).