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Edited version of private advice
Authorisation Number: 1051646365210
Date of advice: 17 March 2020
Ruling
Subject: CGT - deceased estates - two year discretion
Question
Can you disregard any capital gain made on the sale of the Property?
Answer
Yes. The Commissioner accepts the view that the Trustee of a testamentary trust is included in the definition of 'trustee of a deceased estate' for the purposes of section 118-195 of the Income Tax Assessment Act 1997.
A testamentary trust was created under the terms of the will of the Deceased. The Property is held upon the terms of this trust. You are seeking to disregard any capital gains made upon the sale of the Property in your capacity as trustee.
The Commissioner also accepts that the Property was occupied by an individual who had a right to occupy under the Deceased's will. The individual with a right to occupy under the will has used the Property as their main residence since the Deceased's death until the trust's ownership ends. Therefore, you are able to disregard any capital gains on the sale of the Property.
This ruling applies for the following period:
Year ending 30 June 2019
The scheme commences on:
1 July 2018
Relevant facts and circumstances
The Deceased and their spouse bought a Property (the Property) on XXXX.
They purchased the Property as joint tenants and moved into it as their main residence.
The Deceased's spouse died on XXXX. The Property then passed wholly to the Deceased. The Property was the Deceased's main residence until they died. The Property was never used for the purpose of producing assessable income.
In XXXX, the Deceased's only child, their spouse and their child moved into the Property with the Deceased in order to attend to their care needs.
Following the Deceased's death, title to the Property was transferred to the Deceased's child as their executor.
Under the terms of the Deceased's will, the Property was held under a discretionary testamentary trust, the terms of which were set out in the Deceased's will.
The Trustees of the Trust are the Deceased's child and their grandchild. Title to the Property was transferred to them in their capacity as joint trustees of the Trust.
The Deceased only had one child and they are the primary beneficiary of the Trust.
The terms of the Trust allow the trustees to, among other things:
Clause X - "allow any beneficiary to occupy have custody of or use any immovable property or chattels on such terms and conditions as the Trustee shall think fit"
Following the Deceased's death, the Deceased's child and grandchild as trustees of the Trust made a resolution. This resolution allows the family to occupy the Property rent-free pursuant to Clause X. The Deceased's child, their spouse and their child continued to live in the Property as their main residence until it was sold. The Property was never used for the purpose of producing assessable income.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 118-195(1)