Understanding Tax Implications for Deceased Estates and Beneficiaries
When a dwelling or ownership interest in a dwelling is passed to a legal personal representative (LPR) or an individual beneficiary from a deceased estate, special rules come into play. These rules determine the Main Residence Exemption (MRE) when the dwelling is eventually sold by the LPR or beneficiary.
Recent amendments ensure that the restrictions on MRE for foreign residents also apply to deceased estates and beneficiaries. How these rules apply depends on whether the deceased or the beneficiary was a foreign resident.
Deceased Not Considered an Excluded Foreign Resident
If, at the time of death, the deceased was an Australian resident or a foreign resident for six years or less (not an excluded foreign resident), the MRE accrued by the deceased for the dwelling remains available to the trustee or beneficiary of the deceased estate who inherits the dwelling.
This includes:
- The period when the deceased used the dwelling as their main residence.
- The two years following the deceased's death (or longer if allowed by the Commissioner).
- The period after the deceased's death when the dwelling was the main residence of:
- Their spouse before their death.
- Someone with a right to occupy the dwelling under the deceased's Will.
The beneficiary who inherits the dwelling can usually also count the period they live in the dwelling as their main residence after the deceased's death. However, if that beneficiary is an excluded foreign resident at the time of the dwelling's sale, they won't get any additional MRE.
Should you have any questions or need assistance, feel free to reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment through our live calendar.
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