A Matter of Trusts
Where there has been land consolidation, how does this affect the application of the main residence exemption for deceased estates?
Introduction
Since at least the publication of TD 1999/69, the Commissioner of Taxation has accepted that the main residence exemption (MRE) in Subdiv 118-B of the Income Tax Assessment Act 1997 (Cth) (ITAA97) can potentially apply to more than one unit of accommodation.
This policy captures the spirit of the MRE — to allow taxpayers to disregard the capital gains incurred when they sell their home, which in most cases is their most significant asset. The policy ensures that taxpayers who have, for whatever reason, a home that is not a conventional single unit to still be able to access the MRE.
As the policy is on the definition of a “dwelling”, it also extends to the MRE for deceased estates. This raises an interesting question: what happens if a trustee or beneficiary of a deceased estate acquires a dwelling that is spread across multiple titles and decides to consolidate?
This month’s column explores the rules and application of the MRE for deceased estates where the property has undergone land consolidation.
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