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Edited version of private advice
Authorisation Number: 1012660654466
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 period
Year ended 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
Your parents passed away.
Their main residence was purchased after 20 September 1985.
Due to their wills being informal, in that there was only one signature when two are required, the Grant of Probate was delayed.
The property has been placed on the market for sale.
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; 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, your parent passed away in the relevant financial year, and the property has not been sold within the two year time limit. 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 delay in the disposal of the property was caused by the informal wills and the delay in probate being granted.
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.
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