| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012464176145
Ruling
Subject: Capital gains tax - deceased estate - Commissioner's discretion to extend the two-year period - main residence exemption
Question: Will the Commissioner exercise his discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) in your particular circumstance?
Answer: No.
This ruling applies for the following period
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are the trustee of a deceased estate. The deceased died approximately two years ago.
The deceased owned a dwelling which was their main residence.
The dwelling has not been used to produce assessable income.
There has been a delay in the disposal of the dwelling which has been outside the control of you and beneficiaries of the estate, for the following reasons:
· the disposal of the dwelling is not a normal residential sale and the timeliness of the negotiations are largely beyond your control
· a company has offered to purchase the property and negotiations commenced almost 12 months ago
· a valuation of the property was undertaken by a licensed valuer in accordance with the mining company's policy
· negotiations are taking place as to an agreed price for the sale of the dwelling
· being an individual it is difficult for you to place pressure on the company to speed up the negotiation process
· the time at which these negotiations will be completed is at this stage unknown as the time the mining company takes is beyond your control. It is likely that the negotiations will extend beyond the two year period contained in section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997), and
· in addition, there is a third party company who is valuing that complicates matters further.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 118-195
Income Tax Assessment Act 1997 Section 118-200
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Due to recent changed to section 118-195 of the ITTA 1997, the Commissioner now has discretion to extend the two-year period in the Act where:
· the ownership of a dwelling or will is challenged
· the complexity of a deceased estate delays the completion of administration of the estate
· a trustee or beneficiary is unable to attend to the deceased estate due to unforseen or serious personal circumstances arising during the two-year period (for example, the taxpayer or a family member has a severe illness or injury), or
· settlement of a contract for sale over the dwelling is unexpectedly delayed or falls through or circumstances outside the beneficiary or trustee's control.
In your situation, you have been negotiating with a company in relation to them purchasing the dwelling for a considerable time, and as yet an agreed price has not been reached. You have indicated that you are unsure as to when the mining company will advise you of their decision.
We acknowledge that the mining company may have prolonged the sale process but based on the information provided, we believe that sufficient time has been allowed from when the mining company indicated their intention to purchase the dwelling to reach a settlement price. For this reason the settlement for the sale of the dwelling does not fall into the category of unexpected delay.
Therefore, you do not meet the criteria in which the Commissioner may exercise his discretion to extend the two-year period in which a deceased's main residence must be sold.
The normal capital gains tax (CGT) rules apply to the disposal of the dwelling.
CGT
The most common CGT event CGT event A1 occurs when you dispose of an asset to another entity. The time of the event is when you enter into the contract for disposal of it, or if there is no contract when the change of ownership occurs.
Deceased estate - main residence
Special rules apply of the asset was the deceased person's main residence. If you inherit a deceased person's dwelling, you may be exempt or partially exempt when a CGT event occurs to it.
For more information on how CGT applies please see the enclosed information. This information has been taken from the Guide to capital gains tax 2011-12 (NAT 4151). Information is also available on our website - www.ato.gov.au.
The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
