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Edited version of your private ruling
Authorisation Number: 1012539990573
Ruling
Subject: Capital gains tax
Question
Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the two year period?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commences on:
1 July 2012
Relevant facts and circumstances
The deceased passed away in 201X.
The deceased moved into their main residence on 198X.
The deceased did not leave a will.
Letters of Administration was eventually granted to one of the deceased's children. However, another of the deceased's children contested this to make a claim for further provision from the Estate.
Settlement between the parties was resolved in 201X.
The sale of the deceased's main residence was completed in 201X.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-195.
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 two years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
In your case the deceased acquired the property in 198X. The deceased passed away in certain month 201X, and the property was not sold until a recent year.
The property was sold outside the two year period outlined in subsection 118-195(1) of the ITAA 1997. Therefore, you will only be able to disregard the capital gain from the sale of the property if the Commissioner grants an extension to the two year time limit.
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
In your case, the deceased lived in the property until they passed away. The deceased did not leave a will and the administration of the estate was contested until finally a settlement was reached nearly 2 years later.
The delay in the disposal of the property was caused by the delay in administering the estate. The property settled in 201X.
Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit. Accordingly, you can disregard the capital gain that arose as a result of the disposal of the property.
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