Tax Tip 570: Trustee Held Property, Right to Reside, 6 year Rule and No CGT

It is possible for the trustee of a deceased estate to buy a property to allow a beneficiary to reside in, and for the beneficiary to later move out of and rent and for the 6 year rule to be used to keep that property CGT free.



Example

Homer dies. He leaves all of his assets to the trustee of a Testamentary Discretionary Trust (TDT). In his will he instructs the trustee to buy a property and to give Bart a right to reside in that property.



If a property is purchased, even after Homer’s death, this property could qualify as one that is exempt from CGT if Bart resides in it and it is not income producing etc.



This property would be treated as Bart’s property for CGT law.



Bart would also move out of the property and the trustee could rent it out. Yet, it could still be exempt from CGT because of the 6 year Rule.



This is what happened. Bart live in the property for a few months and then moved out and rented in another area. He didn’t claim another property as his main residence.

The trustee of the TDT later sold the property less than 6 years after Bart moved out and that sale was CGT free.


relevant legislation is

S 118-210(1) ITAA97

S 118-145 ITAA97



See also

Taxation Determination TD 1999/74 https://www.austlii.edu.au/au/other/rulings/ato/ATOTD/1999/TD199974.pdf





See a private binding ruling along these lines:

Authorisation Number: 1051979216697

https://www.ato.gov.au/law/view/view.htm?docid=EV/1051979216697&PiT=99991231235958