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Edited version of your written advice
Authorisation Number: 1012940453318
Date of advice: 27 January 2016
Ruling
Subject: Capital gains tax exemption
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 2016
Year ended 30 June 2017
The scheme commences on:
1 July 2015
Relevant facts and circumstances
Your family member passed away.
Their main residence was purchased before 20 September 1985.
The will was contested and there was a delay in receiving the Grant of Probate.
You are now ready to prepare the house for sale.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-195.
Reasons for decision
Subsection 118-195(1) of the ITAA 1997 states that if you are an individual who owns a dwelling in a capacity as trustee of a deceased estate (or it passed to you as a beneficiary of an estate), then you are exempt from tax on any capital gain made on the disposal of the property 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 property 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 two years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed).
In your case, the property was purchased by the deceased before 20 September 1985 and has not been sold within the two year time limit.
The Commissioner can exercise his 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 delay in the disposal of the property was caused by the dispute over the will and the delay in receiving the Grant of Probate.
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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