Edited version of private advice

Authorisation Number: 1052328776261

Date of advice: 06 November 2024

Ruling

Subject: Inherited property- main residence exemption

Question 1

Are you eligible for a full main residence exemption on disposal of the property in accordance with section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

Yes.

Section 118-195 of the ITAA 1997 provides that in certain circumstances you can disregard the capital gain or loss from an interest in a dwelling that passed to you as a beneficiary in a deceased estate or you owned as the trustee of a deceased estate.

The first requirement is that the dwelling was either acquired by the deceased before XX September 19XX or it was their main residence just before they died and was not used to produce income at that time. The second requirement is that either your ownership interest must end within X years of the deceased's death (or within a longer period allowed by the Commissioner), or from the deceased's death until your ownership interest ends the dwelling was the main residence of:

(a)            the spouse of the deceased immediately before the death; or

(b)            an individual who had a right to occupy the dwelling under the deceased's will; or

(c)            an individual to whom the ownership interest passed as a beneficiary

The property can continue to be the main residence of one of the above people if they choose to treat it as their main residence, even if they have stopped living in it (section 118-145 of the ITAA 1997).

In your case, the first requirement is met as the deceased acquired their ownership interest before XX September 19XX. In any case, it was the deceased's main residence just before they died and was not used to produce income at that time. The second requirement is met as the dwelling was from the deceased's death until your ownership interest ended, the main residence of the deceased's spouse.

Therefore, you are entitled to a full exemption under section 118-195 of the ITAA 1997.

Further information about inherited property and capital gains tax (CGT) can be found by searching ato.gov.au for 'QC 66054'.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

Year ended 30 June 20XX

Relevant facts and circumstances

The deceased passed away on XX/XX/20XX.

The deceased owned a dwelling that was acquired prior to XX September 19XX.

The property was situated on less than X hectares of land.

The property was the main residence of the deceased just before they passed away and was not used to produce assessable income at any time.

The deceased passed away intestate, and the property remained in their name and became part of their estate from their date of death.

The property was the main residence of the deceased's spouse and their family from the date of acquisition until the deceased's date of death.

The deceased's spouse did not own another main residence between the acquisition of the property by the deceased and the sale of the property.

Following the deceased's death, the deceased's spouse continued to reside in the property and treated the dwelling as their main residence.

In 20XX, the deceased's spouse's health began to decline, and they commenced living with a family member permanently.

On XX/XX/20XX, the deceased's spouse was appointed Administrator of the deceased's estate under Letters of Administration.

The deceased's spouse paid for all the holding costs of the property from the deceased's death up until when the property was sold.

The deceased's spouse negotiated the sale of the property, and a contract was entered to sell the property on XX/XX/20XX with settlement occurring on XX/XX/20XX

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195

Income Tax Assessment Act 1997 section 118-145