| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012921019463
Date of advice: 3 December 2015
Ruling
Subject: Capital gains tax - deceased estate - life interest
Question:
Is any capital gain or capital loss you made on the sale of your interest in the dwelling located at X, disregarded?
Answer:
Yes.
This ruling applies for the following periods:
Year ending 30 June 2015
The scheme commenced on:
1 July 2014
Relevant facts
The deceased acquired an interest in a dwelling (the dwelling) located at X prior to 19 September 1985.
The deceased passed away in 200X.
The dwelling was the deceased's main residence.
The deceased's spouse, ('A') owned the other interest in the dwelling.
'A' was left a life interest in the dwelling in relation to the deceased's share in the dwelling.
'A' occupied the dwelling as their main residence until moving into a nursing home.
'A' will make an absence choice to continue to treat the dwelling as their main residence for the period where they resided in the nursing home up until the dwelling was sold.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 108-5
Income Tax Assessment Act 1997 Section 115-15
Income Tax Assessment Act 1997 Section 115-25
Income Tax Assessment Act 1997 Section 118-195.
Reasons for decision
The most common capital gains tax (CGT) event is a CGT event A1 which 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 change of ownership occurs.
However, there are a number of different exemptions or exceptions that, if they apply, can mean that a capital gain or capital loss that you make as a result of a CGT event is disregarded.
Full Exemption
One such exemption relates to the disposal of a dwelling by the executor of a deceased estate. Section 118-195 of the Income Tax Assessment Act 1997 outlines the conditions under which the capital gain or capital loss can be disregarded in full.
In your situation, any capital gain or capital loss you made from the sale of your interest in the dwelling is disregarded because:
• You owned it as executor of the deceased estate
• The deceased acquired their ownership interest before 20 September 1985
• The dwelling was 'A's' main residence from the date the deceased passed away until your ownership interest ended, and
• 'A' was the spouse of the deceased when they passed away
Absence choice
Note re absence choice: The spouse of a deceased person can choose to continue to treat a dwelling as their main residence after they move out of it for the purpose of determining whether an executor is entitled to claim a full main residence exemption.