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Edited version of your written advice
Authorisation Number: 1012896708348
Date of advice: 26 October 2015
Ruling
Subject: Extension of Two Year CGT Exemption
Question
Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the two year time period to dispose of the dwelling?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2015
Year ended 30 June 2016
The scheme commenced on
1 July 2014
Relevant facts
The deceased lived in their main place of residence (the property) prior to their death and the property was not used to produce any income at that time.
The deceased's will was contested which delayed the sale of the property.
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 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 Commissioner would be expected to exercise 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 deceased resided in the property until their death and the property was not being used to produce assessable income at that time.
There was a challenge to the will which interfered with your ability to dispose of the property within the two-year time period in order to take advantage of the CGT main residence exemption that is generally available for trustees of deceased estates.
In your case, it is considered that you have supplied a reasonable explanation for the delay in the disposal of the dwelling, and therefore the Commissioner will exercise his discretion to extend the two year time period.
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