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ATO Interpretative Decision

ATO ID 2002/52 (Withdrawn)

Income Tax
Capital Gains Tax - Deceased Estate/Main Residence

Attention This ATO ID is withdrawn on the basis content is covered on ato.gov.au at Inheriting a dwelling (QC 17195).
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 5 May 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Issue

Upon disposal of a dwelling, can the trustees of a deceased estate obtain a full exemption under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997), if the spouse of the deceased moved out of the dwelling but chose to apply the absence provision in section 118-145 of the ITAA 1997?

Decision

Yes. The trustees of a deceased estate can claim a full exemption under subsection 118-195(1) of the ITAA 1997 on disposal of the deceased's dwelling, even though the dwelling is the main residence of the spouse of the deceased only by virtue of a choice made under section 118-145 of the ITAA 1997.

Facts

The deceased acquired a dwelling prior to 20 September 1985. The dwelling was the main residence of the deceased and their spouse until the deceased's death after 20 September 1985.

The deceased's will provided that the trustees of the deceased's estate sell the dwelling and divide the proceeds between the deceased's spouse and children.

The spouse of the deceased continued to reside in the dwelling for a number of years. When the spouse moved out, the dwelling remained vacant for several months. The trustees then rented the dwelling. The trustees now propose to sell the dwelling.

Reasons for Decision

Subsection 118-195(1) of the ITAA 1997 allows a capital gain or loss to be disregarded when a CGT event happens to a dwelling owned by a trustee of a deceased estate, if:

-
  the deceased acquired the dwelling prior to 20 September 1985; and
-
  the dwelling was the main residence of the spouse of the deceased from the date of the deceased's death until the trustee's ownership period ends.

There is no requirement in subsection 118-195(1) of the ITAA 1997 that the spouse of the deceased actually reside in the property in the period between the date of the deceased's death and the date that the trustee's ownership interest ends. The requirement is that the dwelling be the main residence of the spouse of the deceased and continue to be so for the relevant period. It is the status of the dwelling as a main residence that is relevant.

Subsection 118-145(1) of the ITAA 1997 provides that if a dwelling that was a person's main residence ceases to be their main residence, they may choose to continue to treat it as their main residence. If the dwelling is used for income producing purposes, there is a six year time limit for which the person can continue to treat the dwelling as their main residence (subsection 118-145(2) of the ITAA 1997). However, if this choice is made, no other dwelling can be treated as that person's main residence during that period (subsection 118-145(4) of the ITAA 1997).

As the dwelling was the main residence of the deceased's spouse, the spouse can choose under subsection 118-145(1) of the ITAA 1997 to continue to treat it as their main residence. A full exemption will be available under section 118-195 of the ITAA 1997 provided the dwelling was not rented for more than 6 years.

Amendment History

Date of amendment Part Comment
23 May 2014 Decision Updated for clarity.
  Facts Updated for clarity.

Date of decision: 21 September 2001

Year of income:Year ending 30 June 2002

Legislative references:
Income Tax Assessment Act 1997
   subsection 118-145(1)
   subsection 118-145(2)
   subsection 118-145(4)
   subsection 118-195(1)

Keywords
Capital gains tax
Capital gains
CGT main residence exemption
Dwelling ceases to be a main residence
CGT deceased estates

Siebel/TDMS reference number: DW255753; 1-B0L4MIY

Business line: Small Business/Individual Taxpayers

Date of publication: 24 January 2002

ISSN: 1445-2782

ATO ID 2002/52 (Withdrawn) history   Top  
   Date   Version 
   21 September 2001   Original statement   
   23 May 2014   Updated statement   
 You are here ®   5 May 2017   Withdrawn   


 


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