Capital gains tax - inherited dwelling

Will a capital gain or capital loss from the sale of an inherited dwelling be disregarded under section 118-195 of the Income Tax Assessment Act 1997 ( ITAA 1997)?

Yes, a capital gain or capital loss made from the sale of an inherited dwelling is disregarded if the dwelling is disposed of within 2 years of the deceased's death.

The deceased person acquired the dwelling on or after 20 September 1985. The deceased person's death occurred after 20 August 1996. The dwelling was their main residence at the time of death. The dwelling was not being used for income producing purposes up to the date of death.

The ownership of the dwelling passed to the taxpayer as a beneficiary of the deceased person's estate. The dwelling has remained vacant since the date of death. The taxpayer is not intending to use the dwelling as their main residence.

Section 118-195 of the ITAA 1997 allows a taxpayer to disregard a capital gain or capital loss made from a CGT event that happens in relation to a dwelling where: • The ownership of the dwelling passed to the taxpayer as the beneficiary of the deceased person's estate, • The deceased person acquired the dwelling on or after 20 September 1985, • The deceased person died after 20 August 1996, • The dwelling was the deceased person's main residence just before death, • The dwelling was not used for income producing purposes, and Either: - the taxpayer disposes of their interest in the dwelling within 2 years of the deceased's death, or - where the dwelling is the taxpayer's main residence from the date of death until the taxpayer's ownership ends.

The taxpayer will satisfy the criteria to have a capital gain or loss disregarded if the dwelling is disposed of within 2 years of the deceased's death.

Note: as the dwelling is not the taxpayer's main residence, the extended option for disregarding capital gains and capital losses is not available to the taxpayer.