1011469665048 | Legal database

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Edited version of private ruling

Authorisation Number: 1011469665048

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Ruling

Subject: Capital gains tax - deceased estate - extension of two year period to dispose of property

Question:

Can the Commissioner extend the two year period for the disposal of the property?

Answer:

No.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

The deceased and their sibling jointly purchased a property, with a dwelling located on it, before 20 September 1985.

The deceased passed away.

You were named as the trustee of the deceased's estate.

As trustee, you entered into agreements to dispose of the property. These agreements were terminated when it was determined that the local council was not going to approve the proposed subdivision of the property on which the agreements were based.

You, as the trustee, are currently in negotiations with a Government Department for the acquisition of an unknown portion of the property. Originally the Government Department had wanted to purchase the part of the property, but is now potentially looking to purchase more of the property.

When it has been determined how much of the property will be acquired by the Government Department, you will put the balance of the property on the market.

At this point in time, you have not disposed of any part of the property.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 Subsection 118-130(3)

Income Tax Assessment Act 1997 Subsection 118-195(1)

Income Tax Assessment Act 1997 Subsection 118-195(2)

Reasons for decision

Disposal of inherited dwelling within two years of date of death

A full main residence exemption may be applicable to the trustee of a deceased estate where the dwelling of the deceased is disposed of within two years of the deceased's death. The relevant ownership interest of a trustee in the dwelling must end within two years of the deceased's death in order for the concession to apply. Where the sale or other disposal of the dwelling proceeds under a contract, the ownership interest ends at time of settlement of the contract of sale.

The Commissioner does not have any discretion to extend the two year period. This means that the full exemption will not be available where, for example, a protracted dispute prevents administration of the estate being completed within two years. Therefore, if a property is not sold within the two year time frame then any capital gain or capital loss realised on the property will not be disregarded.

In this case, the deceased passed away and the property, on which a dwelling was located, formed part of their estate. You, as trustee, are currently in negotiations for the disposal of an unknown portion of the property to the Roads and Traffic Authority. At this point in time, you have not disposed of any of the property.

Whilst we appreciate your circumstances, there is no discretion for the Commissioner to extend the two year period. Therefore, as the property has not been disposed of by you as trustee of the deceased's estate within two years of the deceased's date of death, any capital gain or capital loss made on the disposal of the property cannot be disregarded.

Note: If the Roads and Traffic Authority are compulsorily acquiring the property, you may wish to apply for a new private ruling if you are wanting to purchase a replacement asset.

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