It is common for a will to give a family member the right to continue living in the family home after someone passes away. This can provide important security for a spouse, child or other loved one, but there can also be tax consequences that need to be considered.
The ATO has recently released draft Taxation Determination TD 2026/D1, which looks at when the main residence CGT exemption can apply where a person is given a right to occupy a property under a will.
The draft Determination highlights that the way a right to occupy is created matters. Generally, the right needs to be expressly granted to a person named in the will. A right granted later by an executor or trustee under a broad discretion, or under a separate agreement such as a deed of arrangement, may not receive the same treatment.
This is particularly relevant when preparing wills containing a right to reside or right to occupy clause. The wording of the will can have implications beyond simply deciding who can live in the property.
The ATO’s draft position is also relevant to situations where a beneficiary is given an ongoing right to live in a property and may have implications for the availability of the main residence exemption after the deceased’s estate has been administered.
Tax and financial consequences will depend on the circumstances of each estate. For this reason, when preparing or reviewing a will, it is important to consider whether financial or tax advice should also be obtained. If you are considering including a right to reside in your will, contact RobertsLaw to discuss your estate planning needs.