Edited version of private advice

Authorisation Number: 1052010293926

Date of advice: 18 August 2022

Ruling

Subject: CGT - main residence exemption

Question

Is the Trustee able to disregard any capital gain or capital loss made on the disposal of the property?

Answer

Yes. Under section 106-50 of the Income Tax Assessment Act 1997, Person A was considered to be absolutely entitled to the property. As Person A was absolutely entitled to the property the Trustee is able to disregard any capital gain or capital loss made on the disposal of the property under the main residence exemption provisions.

This ruling applies for the following period:

Year ended 30 June 20XX.

The scheme commences on:

1 July 20XX.

Relevant facts and circumstances

Sometime ago Person A sustained serious injuries.

Person A has very limited physical facilities, requires 24-hour care and suffers from some mental impairment.

The Public Trustee in the relevant State or Territory of Australia was appointed manager of the financial and personal affairs of Person A by the relevant authority.

Approximately a decade after Person A sustained serious injuries the court issued in favour of Person A for a sum of $XX,XXX,XXX.

The Public Trustee was re-established as the manager of the estate of Person A.

Authority to receive settlement was signed by the Public Trustee of Person A and settlement was to be paid directly to the Public Trustee.

Over the next three months, all settlement money was paid to the Public Trustee.

The Public Trustee identified a property suitable for Person A to live which was appropriate for modification for Person A's needs.

The Public Trustee received confirmation from Person A that they wished to proceed with an offer for the property.

The offer to purchase the property was accepted.

The contract to purchase the property was exchanged between the vendor and the buyer, being the Public Trustee. As the Public Trustee has been managing the funds for Person A on the basis that the Public Trustee was the trustee for the funds.

The Public Trustee was re-established as the manager of the estate of Person A.

One month after the contract to purchase the property was signed settlement occurred on the property.

Person A moved into the property as their main residence as soon as the property was ready to move in.

The Public Trustee received legal advice to change the name on the title to the property to Person A.

The Public Trustee wrote directly to the court for clarification of the nature of their order and received the following:

•         The court order has been made in consideration of the Court's Procedures Rules and the applicable Public Trustee legislation,

•         It was quite clear that the Public Trustee's appointment was as trustee under the applicable Public Trustee legislation for a beneficiary with a legal incapacity and

•         As the court had made no discretion otherwise in terms of the applicable legislation, the damages settlement had been paid to the Public Trustee under the applicable legislation as trustee.

The Public Trustee will administer the damages awarded as a trust in compliance with the existing order of the court.

Approximately a decade after the Public Trustee purchased the property Person A passed away (the deceased).

The deceased was receiving 24-hour care from support workers in the property until they passed away.

The property was the deceased's main residence at the time of their death.

The property was not used for income producing activities and no income has been received from the property after the passing of the deceased.

The property is situated on less than two hectares of land.

A short time after the death of the deceased probate was granted.

Approximately one year after the deceased passed away the property was sold.

A short time after the property was sold settlement occurred on the property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 106-50.

Income Tax Assessment Act 1997 section 118-110.