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Edited version of your written advice
Authorisation Number: 1012823215210
Ruling
Subject: Commissioners 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 period?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2014
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The property was the main residence of the deceased before their death and was not being used to produce income.
Probate was issued leaving everything to you.
The will was contested.
Discussions and Mediation occurred between the solicitors of the taxpayer and contestant, in order to settle the matter outside of court.
A judgement/order was issued finalising the matter.
The property was put on the market.
Sale contracts were exchanged and settlement occurred after the end of the two year period.
From the time the will was contested until the judgement/order was issued, you were under instructions from the solicitor that you were not allowed to sell the house.
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 a dwelling passed to you as the trustee of a deceased estate, a capital gain or capital loss you make from a CGT event that happens in relation to a dwelling or your ownership interest in it is disregarded if:
• the dwelling was acquired by the deceased before 20 September 1985, or
• the dwelling 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 Explanatory Memorandum for Tax Laws Amendment (2011 Measures No. 9) Bill 2011 includes the following 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 (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 reasons outside the beneficiary or trustee's control.
Due to delays caused by the will being challenged the property was unable to be sold within two years of the deceased death.
Accordingly 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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