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Edited version of your written advice
Authorisation Number: 1012796168444
Ruling
Subject: Deceased estate - 2 year discretion
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.
Answer
Yes.
This ruling applies for the following periods
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commences on
November 2012
Relevant facts and circumstances
The deceased, passed away several years ago.
The deceased owned property. The property was the deceased's main residence.
The property has never been used to produce assessable income.
The deceased purchased the property prior to 20 September 1985.
There was a delay in the issuing of probate.
There is currently an interested buyer for the property, but contracts are yet to be drawn-up. It is anticipated that the settlement of the property should be completed within a 6 month period.
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 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).
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, there was a delay in the issuing of probate. This delay prevented the trust from placing the property on the market within 2 year of the deceased's death. There is currently an interested buyer and the sale should be completed within a 6 month period. The property was the deceased's main residence before they passed away, and it was not used to produce assessable income.
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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