The ATO has recently updated its practical compliance guideline on how the CGT main residence exemption may apply in cases where a dwelling is disposed either in the capacity of an individual beneficiary or a trustee of a deceased estate. Generally, CGT on disposal of an ownership interest (as either an individual beneficiary or as the trustee of the deceased estate) within 2 years of the deceased’s death can be disregarded.
Learn more about this guideline update with this blog post from Alexander Bright – experienced tax accountants in Melbourne.
For disposals that take longer than 2 years, the Commissioner has the discretion to extend this period. Practical compliance guideline PCG 2019/5 outlines a safe harbour compliance approach that allows individual beneficiaries and trustees of the deceased estate to manage their tax affairs as if the Commissioner had exercised the discretion to allow for a longer period.
To qualify for the safe harbour, the following conditions must be satisfied:
The updated guideline now explicitly considers the effect that COVID-19 has had and contains examples to illustrate the complexity in claiming safe harbour.
In the event that safe harbour conditions cannot be met, the guideline also outlines factors that the Commissioner may consider when weighing up whether or not to exercise their discretion. These include the personal circumstances of the surviving relatives, the degree of difficulty in locating all beneficiaries required to prove the will, any period the dwelling was used to produce an assessable income, and the length of time an ownership interest was held in the dwelling.
It is important to note that the ATO considers the circumstances that have caused the delay in disposal to be more important than the length of the delay. Any potential capital gain or loss is also not considered to be relevant to the exercise of discretion.
If you need help as a beneficiary or trustee of a deceased estate to ensure that the disposal of a dwelling meets the CGT main residence exemption, our accountants in Melbourne have the expertise to help you navigate this complex area. Whether applying the safe harbour conditions or seeking the Commissioner’s discretion, we can assist at every stage. Contact our accounting firm today to find out how we can help you.
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