| Disclaimer This edited version has been archived due to the length of time since original publication.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: 1012573173910
Ruling
Subject: CGT - deceased estates - (2 year discretion)
Question:
Will the Commissioner exercise 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:
No.
This ruling applies for the following period:
Year ended 30 June 2014
The scheme commenced on:
1 July 2013
Relevant facts and circumstances
You are a beneficiary of a deceased estate.
The deceased passed after 19 September 1985.
The deceased's will provided that their child, who resided at the deceased's main residence had a right to reside in the property for a period of 2 years whilst locating suitable new accommodation.
The deceased's child is in receipt of a disability pension.
The period taken to locate suitable accommodation took longer than anticipated.
The deceased main residence was placed on the market in the 2013 income year.
The property did not sell within 2 years of the deceased's death.
You have made a capital gain.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 118-130(3).
Income Tax Assessment Act 1997 section 118-195.
Income Tax Assessment Act 1997 subsection 118-195(1).
Reasons for decision
A capital gain or capital loss is disregarded under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) where a CGT event happens to a dwelling if it passed to you as an individual beneficiary of a deceased estate or you owned it as the trustee of the deceased estate. The availability of the exemption is dependant upon:
- who occupied the dwelling after the date of the deceased's death, or
- whether the dwelling was disposed of within two years of the date of the deceased's death.
For a dwelling acquired by the deceased, you will be entitled to a full exemption if:
· the dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of the following relevant individuals:
- the spouse of the deceased immediately before death (except a spouse who was living permanently separately and apart from the deceased)
- an individual who had a right to occupy the dwelling under the deceased's will, or
- an individual beneficiary to whom the ownership interest passed and that person disposed of the dwelling in their capacity as beneficiary, or
· your ownership interest ends within two years of the deceased's death.
In your case, when the deceased died, the property passed to you. The property was the deceased's main residence prior to death. However, the property was not occupied by a relevant individual after the deceased's death and therefore this basis of exemption is not available.
Subsection 118-130(3) of the ITAA 1997 provides that where the sale or other disposal of the dwelling proceeds under a contract, the ownership interest ends at the time of settlement of the contract of sale and not at the time of entering the contract.
The property sale settled more than two years after the deceased's death, therefore, the alternative basis of exemption is also not satisfied.
However, subsection 118-195(1) of the ITAA 1997 confers on the Commissioner discretion to extend the two year exemption period, thus this alternative basis of exemption in the provision may apply.
The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion:
· 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 (e.g. 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 reasons outside the beneficiary or trustee's control.
The delay in disposing of the property were caused by the sale of the property taking longer expected and were also due to delays in locating suitable accommodation for another beneficiary.
In determining whether or not to grant an extension the Commissioner is also expected to consider whether and to what extent the dwelling is used to produce assessable income and how long the trustee or beneficiary held it.
In your circumstances, you held the property for a period longer than 2 years and there are no factors which prevented the sale of the property.
Having considered the relevant facts, the Commissioner is not able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit.
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).
