Deceased was an excluded foreign resident at death
If, at the time of death, the deceased was an excluded foreign resident (i.e., a person who has been a foreign resident for a continuous period of more than six years), then the MRE accrued by the deceased in respect of the dwelling is not available to the trustee or beneficiary (or beneficiaries) of the deceased estate who are bequeathed the dwelling. Refer to S.118-195(1)(c).
TAX WARNING – No access to two-year post-death concession
Ordinarily, where an ownership interest in a post-CGT dwelling ends (e.g., dwelling is disposed of) within two years of the deceased’s death and the dwelling was the deceased’s main residence just before they died, a full MRE will apply on the disposal. Refer to S.118-195.
However, where the deceased was an excluded foreign resident at the time of death, the exemption under S.118-195 will not apply as a result of the new requirement in S.118- 195(1)(c). The deceased’s status as an excluded foreign resident effectively overrides this exemption and neither the trustee nor beneficiary will be able to access a full MRE in this case.
To the extent the beneficiary is not an excluded foreign resident at the time the CGT event happens for their ownership interest in the dwelling, the beneficiary continues to be entitled to the MRE for any part of the exemption that they accrue in their own right. This is the case by virtue of the partial MRE calculation in S.118-200 and S.118-195(1A)(b).
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