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Edited version of your written advice
Authorisation Number: 1012791033979
Ruling
Subject: CGT - deceased estate
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 commenced on:
1 July 2014
Relevant facts and circumstances
The deceased's estate included the family home (the property).
The property was acquired by the deceased and their spouse prior to 1985. The deceased acquired 100% ownership of the property following the death of their spouse.
The deceased had been transferred to a nursing home prior to their death, however the property was their main residence for capital gains tax (CGT) purposes (as a result of the absence rule contained in section 118-145 of the ITAA 1997). The property was leased for a short period of time (less than six years), however at the time of their death the property was not being used to produce assessable.
The executor of the estate and some of their close family members were impacted by health issues during the period following the deceased's death. This impacted the executor's ability to dispose of the property within two years of the deceased's death.
The property has now been sold.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-145
Income Tax Assessment Act 1997 Section 118-190
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 from a dwelling 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).
Section 118-145 of the ITAA 1997 allows you to choose to treat a dwelling as your main residence even though you no longer live in it. If you use the property to produce assessable income, you can choose to treat it as your main residence for up to six years after you stop living in it.
Subsection 118-190 of the ITAA 1997 provides that if you acquire an ownership interest in a dwelling as the trustee or beneficiary of a deceased estate, you ignore any income producing use of the property before the deceased's death if the choice had been made under section 118-145 of the ITAA.
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 (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 trustee or executor of the estate was unable to attend to the estate due to serious personal circumstances that arose during the two year period.
Having considered the particular circumstances of this case, the Commissioner will 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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