In the context of a special disability trust, the MRE generally applies to a dwelling held by such a trust for the benefit of its principal beneficiary, provided this principal beneficiary uses the dwelling as their main residence. Changes were also made in this area of the law to ensure that the MRE applies to a special disability trust in the same way as if the principal beneficiary had directly owned the dwelling.
Under the new changes, the MRE will no longer apply if:
- the principal beneficiary of the special disability trust was a foreign resident at the time a CGT event happens to the dwelling owned by the special disability trust (unless the principal beneficiary satisfies the life events test); or
- the principal beneficiary was an excluded foreign resident at the time of their death and a CGT event happens to the dwelling owned by the special disability trust after the death of the principal beneficiary.
Refer to S.118-218(5) and S.118-225(5).
Furthermore, if, at the time of death, the principal beneficiary was an excluded foreign resident, any component of the MRE that was accrued by the special disability trust while it held the dwelling on behalf of the principal beneficiary is denied to a beneficiary that acquires the dwelling after the principal beneficiary’s death. In this case, the beneficiary’s first element of the dwelling’s cost base and reduced cost base are the same as the special disability trust’s immediately before the deceased’s death. Refer to S.118-225(5), S.118-227(1)(ca) and (3).
These amendments ensure that the way the MRE applies to a special disability trust that holds a dwelling on behalf of a principal beneficiary continues to align with the way the MRE applies for an individual who holds a dwelling in their own right.