probate, estate planningDeceased Estates, Capital Gains Tax Exemptions, and your Main Residence

Deceased Estates, Capital Gains Tax exemptions and your main residence are important considerations as you age. Alice owns her home in Rozelle and needs to move into an aged care facility. Once Alice has settled into the facility, a question may arise as to whether her Rozelle home can still be considered her main residence for tax purposes. When the Rozelle property is sold, will it attract Capital Gains Tax (CGT)?

In Australia, tax is paid on capital gains, the difference between the price at which an asset was acquired and the price at which it was sold. In some circumstances, the capital gain is exempt from this tax, including the sale of a home.

Sale while in an aged care facility

Suppose Alice decides, after moving into the facility that she should sell her home. The sale of the property will be exempt from CGT if:

  • Her former home had not been rented out any longer than six years, or
  • Alice did not have any other residence that could be described as her “main residence”.

Sale through a deceased estate

What is the situation regarding CGT though, after Alice having moved into the facility, dies? It depends on whether (a) Alice acquired her home before or after 20 September 1985, and (b) the date of sale after her death. If Alice purchased her home before that date there will be no CGT if:

  1. The sale occurs within two years of the death of Alice, or
  2. From the time of Alice’ death until the time of sale, the property was not used to generate income, and was the main residence for either her husband (who was not permanently separated from Alice), or a beneficiary of Alice’s Will who had the right to live in the home.

Suppose now Alice continued living in her home until she died. If Alice purchased her home after 20 September 1985, the sale price is exempt from CGT in two cases:

  • Case (2) from above applying and the dwelling was passed onto you as beneficiary or trustee before 20 August, 1996. Alice must have held the dwelling as her main residence from its date of purchase until her death, and must not have used it to generate income, and
  • Case (1) or (2) from above applying and Alice’s home is passed onto you as beneficiary or trustee after 20 August, 1996. At the date of the death of Alice, the dwelling must have been her main residence and not used to generate income.

For help with estate planning, acting as executor of an estate, handling the sale of a deceased’s residence, or other related matters, call 9744 0722 to speak to Acclaim Legal.

Sources:

https://www.ato.gov.au/Forms/Guide-to-capital-gains-tax-2013-14/?anchor=Continuing_main_residence_status_after_d

https://www.ato.gov.au/Individuals/Deceased-estates/In-detail/CGT-on-property-and-other-assets/Inheriting-a-dwelling/