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Edited version of your private ruling
Authorisation Number: 1012468929475
Ruling
Subject: Capital gains tax
Question and answer
Will the Commissioner exercise his discretion to grant an extension of the two year time period to disregard any capital gain or loss made when the deceased's property was sold?
Yes.
This ruling applies for the following periods:
Year ending 30 June 2013
The scheme commenced on:
1 July 2012
Relevant facts and circumstances
The deceased purchased the dwelling prior to 20 September 19XX.
The dwelling was the deceased's main residence.
The deceased died on in the year ended 30 June 20YY.
After the death of the deceased's the dwelling was occupied by a family member, who was his primary care giver before his death.
Probate was granted on in the year ending 30 June 20ZZ.
One of the will's executors was diagnosed with a serious illness during the probate application process.
Another of the will's executors was outside of Australia during the probate application process.
The sale of the dwelling was sold in the year ending 30 June 20ZZ.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 128-15.
Income Tax Assessment Act 1997 Section 118-195.
Income Tax Assessment Act 1997 Section 118-200.
Income Tax Assessment Act 1997 Section 118-210.
Reasons for decision
Under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997). Where the deceased acquired the ownership interest before 20 September 1985, there is a full CGT exemption for the beneficiaries to whom such a dwelling passes for any capital gain that is made from a relevant CGT event happening if:
the beneficiaries' ownership interest ends within two years of the deceased's death, or
from the time of the deceased's death until the beneficiaries' ownership interest ends, the dwelling was the main residence of one or more of the following:
· the spouse of the deceased immediately before death (except a spouse living permanently and separately apart from the deceased)
· an individual who had a right to occupy the dwelling under the deceased's will, or
· if the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary - that individual.
A trustee or beneficiary of a deceased estate may also apply to the Commissioner to grant an extension of the two year time period, where the CGT event happens in the 2008-09 income year or later income years. Generally, the Commissioner would exercise the discretion in situations where the delay is due to circumstances which are outside of the control of the beneficiary or trustee, for example:
· the ownership of a dwelling or a 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 unforeseen 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 of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary or trustee's control.
In exercising the discretion the Commissioner will also take into account whether and to what extent the dwelling is used to produce assessable income and for how long the trustee or beneficiary held the ownership interest in the dwelling.
In your case, the deceased acquired the ownership interest in the dwelling before 20 September 19XX; the complexity and poor record keeping of the deceased created delays with the application of the probate. Two of the executors were unable to attend the deceased estate due to unforeseen and serious personal circumstances arising during the two-year period; one was diagnosed with a serious illness, and the other was outside of Australia.
Therefore, the Commissioner has decided in this instance to exercise his discretion to grant an extension of the two year time period to disregard any capital gain or loss made when the property was sold.
ATO view documents
Guide to capital gains tax 2012
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