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Edited version of your written advice
Authorisation Number: 1051196191304
Date of Advice: 27 February 2017
Ruling
Subject: Capital Gains Tax
Question
Is the property subject to Capital Gains Tax?
Answer
Yes
This ruling applies for the following periods:
Year ending 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
The deceased purchased a home.
The deceased died.
Life tenancy is granted to the deceased's de facto partner as per his will.
The executors sold the property.
Life tenancy ceased.
The executors of the Estate purchased another property.
The deceased's de facto partner resided there until they moved into care.
The property was tenanted (or unoccupied).
Relevant legislative provisions
Income Tax Assessment Act 1997 (ITAA 1997)
Reasons for decision
Division 109 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you acquire a CGT asset when you become its owner.
When considering the exemptions that apply to a property that will be disposed of by the trustee of a deceased estate, we need to determine the date any ownership interest(s) have been acquired.
In this case, the owner of the property was the deceased's estate. It was never a main residence of the deceased having been purchased years after his death.
As the deceased didn't acquire the property, the exemption provided for in section 118-195 of the ITAA 1997 cannot apply. No other exemption applies to this property.
The will did not provide any right to occupy or any use and enjoyment in relation to the second property. Therefore as there was no life tenancy right in relation to this property, the date that the deceased de facto moved into care or the date that they died is not relevant for CGT purposes.
Under section 104-10 of the ITAA 1997 CGT event A1 happened when the property was disposed of. The time of the event is when the disposal contract is entered into or, if none, when entity stops being the asset's owner.
A capital gain is made when the capital proceeds from the disposal is more than the asset's cost base. The first element of the cost base in this case is the money paid in respect of acquiring the property. Other costs such as the stamp duty and other incidental costs are also included in the cost base as outlined section 110-25 of the ITAA 1997.
Other information
Please note, the original property would meet the requirements of section 118-195 of the ITAA 1997 and any capital gain or capital loss made would be disregarded.