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Edited version of private advice
Authorisation Number: 1052085239358
Date of advice: 9 February 2023
Ruling
Subject: CGT - surrender of life interest
Question
Is the capital gain that arises from your surrender of your life interest in the property disregarded?
Answer
Yes.
Based on the information provided to the Commissioner any CGT that arose when you surrendered your life interest in the property will be disregarded.
TR 2006/14 says:
15. If the trust is created under the will of a deceased person then CGT event E1 happens when the administration of the deceased's estate in respect of the original asset is completed. Any capital gain or loss made by the deceased from the event happening is disregarded under section 128-10.
The CGT will be disregarded.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
The property was the main residence of the deceased and their spouse.
The deceased died on 21 XXX 19XX with several trusts being established to hold the residue of their estate.
One of these trusts created by the will allowed the spouse the right to use and occupy the property for the remainder of their life, or until they no longer desired to reside in the property.
If the spouse no longer desired to reside in the property, the property was to be sold.
Since the date of the deceased's death.
The spouse has resided in the property pursuant to the rights granted to them by the will.
The parties involved have all agreed that the deceased estates' interest in the property is a XX % interest and the spouse is the registered propitiator of the balance, being a XX % interest in their own right.
On the 28th of XXX 20XX, the spouse purchased the Estate's interest in the property, free from any encumbrances; for the sum of $XX.
On the sale/purchase of the property, the spouse surrendered her life interest.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 128-10