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Edited version of your written advice
Authorisation Number: 1012904611603
Date of advice: 18 November 2015
Ruling
Subject: CGT Payable on Sale of Residence.
Question 1
If unit X is sold within two years of the deceased's death, is the estate entitled to an exemption from capital gains tax (CGT) on the sale?
Answer
Yes
Question 2
If unit Y is sold within two years of the deceased's death, is the estate entitled to an exemption from CGT on the sale?
Answer
Yes
This ruling applies for the following period
Year ended 30 June 2016
The scheme commenced on
1 July 2015
Relevant facts
The deceased died in September in the relevant year. Prior to this the deceased lived at an address that had a number of units on the site. Unit Y and X form one structure and unit Z is a separate structure.
The deceased's residence at the time of his/her death consisted of unit Y and unit X that had been combined into one residence. This was done by enclosing the stairwell in a specific year.
Unit Z was always rented.
The trustee of the deceased's estate is in the process of amending the title of the property to allow for each of the three units to be sold separately.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 118-195(1)
Income Tax Assessment Act 1997 Section 118-200
Reasons for decision
Subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) allows a trustee or beneficiary of a deceased estate to disregard a capital gain or loss from a dwelling if:
• the property was acquired by the deceased before 20 September 1985; or the property was acquired by the deceased on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death and was not then being used for the purpose of producing assessable income;
and
• your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
At the time of his/her death the deceased's dwelling consisted of unit Y and unit X.
Taxation Determination TD 1999/69 allows for the term 'dwelling' as defined in section 118-115 of the ITAA 1997 to include more than one unit of accommodation.
Whether two or more units of accommodation are used together as one place of residence or abode for the purposes of the definition of 'dwelling' is a question of fact that depends on the particular circumstances of each case.
The deceased had made physical changes to the structure to combine the units to be his/her dwelling prior to his/her death.
In this case, the deceased acquired a property after 20 September 1985 and lived in a portion of the property as his/her dwelling.
Although his/her dwelling consisted of a number of units, these units would be subject to subsection 118-195(1) of ITAA 1997 and exempt from CGT provided they are sold within two years of the deceased's death.