| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1051177779082
Date of advice: 5 January 2017
Ruling
Subject: Deceased Estate Main Residence Exemption
Question 1
Is any capital gain or capital loss that the taxpayer may make on the sale or transfer of the dwelling disregarded under subsection 118-210(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes
This ruling applies for the following period:
1 July 2016 to 30 June 2017
1 July 2017 to 30 June 2018
The scheme commences on:
1 July 2015
Relevant facts and circumstances
The deceased passed away on a date in 197X.
Probate was granted to person one.
Person one passed away on a date in 201X.
Person two is the executor of both estates.
The taxpayer has provided a number of documents which forms part of and should be read in conjunction with this private ruling.
● A copy of the grant of probate and Will
● Deed of family arrangement
● Deed of further family arrangement
The deceased's Will provided person one with a life interest in the deceased's estate.
The deceased's relatives are the remainder beneficiaries.
A house was purchased by the estate for a beneficiary to reside in as their main residence. The beneficiary continues to live in the house. The taxpayer will transfer title to the house to this beneficiary.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 118-210.
Income Tax Assessment Act 1997 subsection 118-210(1)
Reasons for decision
Any capital gain or loss that made on the transfer of the house to the beneficiary will be disregarded as the house is the beneficiary's main residence and the ownership interest was acquired under the deceased's Will.
Detailed reasoning
Where a dwelling is acquired by a trustee in accordance with the Will of the deceased for occupation by an individual, provided that the dwelling was the individuals main residence for the entire period, any capital gain or loss resulting from the disposal of the dwelling is disregarded.
A trustee may have general rights under State Trustee Acts to purchase a dwelling for the occupation by an individual. For example Section 11 of the Trustees Act 1958 (Vic) provides the trustee power to purchase a dwelling house as residence for beneficiary. The authority for this action is the relevant State Trustee Act and not the deceased's Will.
In order for a dwelling to be acquired under a Will there needs to be a connection between the Will and the acquisition of the ownership interest. In Taxation Determination TD 1999/74 the Commissioner has stated that the term 'under the Will' does not require that the connection under the Will be a strict one, so long as it is in accordance with the terms, in pursuance of and under the authority of the Will.
The beneficiary has lived in the house since it was acquired. They have not had any other main residence in this time. The house is their main residence. Consequently section 118-210 of the ITAA 1997 will be taken to apply to the transfer of the dwelling to the beneficiary. The taxpayer will be able to disregard any capital gain or loss made on the transfer of the dwelling.