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Edited version of your written advice
Authorisation Number: 1012768476026
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 ending 30 June 2015
The scheme commences on
1 July 2014
Relevant facts and circumstances
The deceased and their spouse acquired a property prior to 1985.
The deceased's spouse died prior to 1985 and the deceased became the sole owner of the property.
The property has always been the family home of the deceased and has never been used to produce income.
The deceased died in the 2011-12 financial year.
The Will provided for the executors to sell the property, pay the expenses of the estate and distribute the funds to the beneficiaries.
The Will did not give any person a right to occupy the dwelling.
Probate was granted in the 2012-13 financial year.
The property was sold at auction in the 2014-15 financial year.
Finalising the estate and selling the property within the 2 year period was stalled due to the issues in acquiring vacant possession of the house to put it on the market.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 118-195(1)
Reasons for decision
Subsection 118-195(1) of the ITAA 1997 allows a trustee of a deceased estate to disregard a capital gain or loss if:
• the property was acquired by the deceased before 20 September 1985, or
• the property was acquired by the deceased on or after 20 September 1985 and the dwelling 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 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
The Explanatory Memorandum (EM) to the Tax Laws Amendment (2011 Measures No.9) Act 2012 provides a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion. This includes 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 (eg 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.
In this case, the sale of the property was delayed due to the issues in acquiring vacant possession of the house to put it on the market. Having considered the circumstances, the Commissioner will exercise his discretion and extend the 2 year time period.
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