Tax Tip 461: Directing your Executor to Buy a Property for a Beneficiary and CGT

Did you know you can get your executor to do stuff for you after you are dead? Nifty hey?

One thing you can do is to instruct them to buy a property for someone to live in. Normally a property held by a trustee cannot qualify for the main residence exemption for CGT. But it can in this case.

Example

Homer dies and leave a couple of kids. His will directs the executor of his estate to buy a property for his son Bart to live in.

The estate has enough cash and the executor does purchase a property for Bart and it begins to be held by them as trustee for the deceased estate.

Bart lives in the property even though it is owned by a trustee. He lives there for 4 years before he marries a man who already has a property, and they move in together.

The trustee then sells the property and distributes the proceeds as per the will.

Who pays the CGT on this property?

The answer is ‘what CGT?’

There is none because of s118-200 ITAA97

This section allows for an exemption for a trustee held house where it was the main residence of an individual.


See s118-200 ITAA97

INCOME TAX ASSESSMENT ACT 1997 - SECT 118.210 Trustee acquiring dwelling under will

 

very PC Terry, well done!!

Would the same apply if upon death executor leaves their PPOR in a TT, then PPOR becomes PPOR for beneficiary, it would still be tax free if sold in the future?

 

Generally not, but it could be structured so that the property could be CGT free potentially, if a beneficiary has a right to reside and actually resides there.

 

and if so, would that mean no land tax, correct?

 

I am wondering if the executor can later transfer to the individual and its also not dutiable at transfer rates? May vary with some states ?

 

In NSW it would, probably in VIC and QLD also.

 

Not sure, I would suspect it might trigger duty in NSW, but have never checked