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Edited version of your private ruling
Authorisation Number: 1012537929487
Ruling
Subject: Commissioner's discretion
Question
Will the Commissioner exercise his discretion to extend the two year exemption period under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2013
The scheme commences on:
1 July 2012
Relevant facts and circumstances
The deceased died intestate.
A family member believed that the property would be left to them.
At this time the family member was diagnosed with a medical condition.
After the claim was made an extensive search of the deceased's house was made in the hope that a will had been left but nothing was found and the intestacy was confirmed.
Letters of administration were granted.
The family member agreed that their claim could not be proved and an arrangement was formed.
The dwelling was never used to produce assessable income.
The dwelling was the residence of the deceased at the date of their death.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 118-195(1)
Reasons for decision
Subsection 118-195(1) of the ITAA 1997 states that if you are an individual who owns a dwelling in a capacity as trustee of a deceased estate, then you are exempt from tax on any capital gain made on the disposal of the property if:
· The property was acquired by the deceased on or after 20 September 1985 and the property was the deceased's main residence just before the deceased's death and was not then being used for the purpose of producing assessable income; or the property was acquired by the deceased before 20 September 1985; and
· your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
The Commissioner can exercise his discretion in situations such as where:
· 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
The property was used as the deceased's main residence. It was not used for rental.
Due to the ownership of the dwelling being challenged, the implication that a will existed and the complexity of the estate the property was not sold within the 2 year time limit.
In your case the Commissioner considers it appropriate to exercise his discretion to extend the 2 year time limit.
As a result of extending the two year time limit, you will satisfy all of the conditions contained in section 118-195 of the ITAA 1997. Accordingly, you can disregard any capital gain or loss that arises as a result of the disposal of the property.
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