Edited version of private advice

Authorisation Number: 1052087172483

Date of advice: 23 February 2023

Ruling

Subject: CGT - deceased estates

Question 1

Is the deceased's acquisition date for Property X DD/MM/YYYY?

Answer

Yes.

Question 2

Did the deceased have a 100% ownership interest in Property X?

Answer

Yes.

The Commissioner accepts that, based upon the deceased's circumstances and the partition agreement, the deceased had a 100% ownership interest in Property X.

Question 3

Will the Commissioner exercise the discretion under section 118-195 of the Income Tax Assessment Act 1997 to allow an extension of time for you to dispose of your ownership interest in the dwelling at Property X that you owned as trustee of the deceased estate and disregard the capital gain or capital loss you made on the disposal?

Answer

Yes.

Having considered your circumstances and the relevant factors the Commissioner will allow an extension of time. Further information about the Commissioner's discretion can be found by searching ato.gov.au for 'QC 66057'.

Question 4

Did the deceased have an ownership interest in Property Y?

Answer

No.

The Commissioner accepts that, based upon the deceased's circumstances and the partition agreement, the deceased did not have an ownership interest in Property Y.

Question 5

If yes, what are the tax implications for the deceased's estate upon the transfer of the 50% ownership interest in Property Y to the deceased's step-parent?

Answer

Not applicable.

This ruling applies for the following period:

The income year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased passed away on DD/MM/YYYY.

During the deceased's lifetime, after separating from their ex-partner, the deceased and their child moved in with the deceased's step-parent at Property Y.

The step-parent had acquired Property Y before 20 September 1985. Property Y was the step-parent's main residence for their entire ownership period and was situated on less than two hectares of land.

Due to sensitive circumstances concerning the step-parent, deceased and their child, it was decided that the deceased and their child should live separately from the step-parent.

The step-parent transferred 50% ownership of Property Y to the deceased as tenants in common, so the deceased could build the new, second dwelling on Property Y (Property X). No consideration was exchanged for this transfer of ownership.

The step-parent's priority in facilitating this ownership transfer was to ensure the welfare of the deceased and their child.

While the new dwelling was being constructed on Property X, the deceased and their child continued to reside with the step-parent in Property Y, with the step-parent paying for all property expenses.

The dwelling on Property X is a free-standing property, situated on less than two hectares of land.

Once the dwelling on Property X was constructed, the deceased paid all property expenses for Property X, with the exception of council rates and water, which were paid for by the step-parent as these accounts were in their name.

Upon completion of the dwelling on Property X, the deceased and their child lived in Property X until the deceased passed away.

The step-parent believed that the deceased had arranged for the subdivision of the land spanning Property X and Property Y during their lifetime, however this had not occurred.

Both the step-parent and deceased considered that Property Y was the step-parent's and Property X was the deceased's, however, no written agreement was entered into concerning ownership of the two properties.

Property X was not used for an income producing purpose throughout the deceased's ownership period, and the deceased never established a different dwelling as their main residence.

The deceased passed away intestate.

The deceased's estate was referred to the Administrator. Letters of administration were subsequently granted to the Administrator.

During the administration of the deceased's estate, the Administrator identified that the land spanning Property X and Property Y had not been subdivided.

The Administrator sought to sell Property X, however subdivision of the land spanning Property X and Property Y had to occur first.

A partition agreement was entered into concerning the subdivision of the properties, whereby the Administrator became 100% owner of Property X and the step-parent 100% owner of Property Y.

The properties were subdivided on DD/MM/YYYY.

As part of the subdivision process, the ownership of Property Y was amended to be 100% owned by the step-parent, and Property X 100% owned by the Administrator.

After the subdivision of the land spanning Property X and Property Y settled, the Administrator arranged for the sale of Property X.

A contract for the sale of Property X was entered into, with settlement occurring on DD/MM/YYYY.

No capital works were undertaken on the dwelling at Property X during the period from the deceased's death until the property was listed for sale.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 118-195