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Edited version of your written advice
Authorisation Number: 1013113869498
Date of advice: 27 October 2016
Ruling
Subject: CGT -deceased estate- 2 year period -extension of time
Question 1
Would the Commissioner exercise the discretion in section 118-195 of the Income Tax Assessment Act 1997 in your particular circumstances?
Answer
No
This ruling applies for the following periods:
Year ending 30 June 20YY
The scheme commences on:
01 July 20XX
Relevant facts and circumstances
The deceased purchased the property as joint tenants with their spouse.
Their spouse deceased and they became sole proprietor of this property until they died.
The property was the deceased's main resident and was not used to produce assessable income.
The deceased's date of death was xxxx.
The deceased died intestate. The estate was administered under Letters of Administration.
You and your sibling inherited the property as sole beneficiaries.
You were both registered as tenants in common.
You live overseas. You relied on sibling as Legal Personal Representative and Administrator of the Estate.
Your sibling lives in a different city. The sibling suffered from personal illness and as a result has surgery.
The property settled xxxx.
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 own a dwelling in your 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 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).
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 this case, the deceased acquired a 50% interest in the property in 19xx. The deceased acquired a further 50% interest in the property when their spouse passed away. The property was the main residence of the deceased until they passed away on a specific date.
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
Application to your circumstances
In this case, you inherited a 50% ownership interest in the property after your parent passed away.
In this case, there has been no challenge to the will, the estate was not complex, there were no unforseen or serious personal circumstances the prevented the sale, and the delay in selling the property is not due to circumstances beyond the beneficiary or trustee's control.
While we appreciate your circumstances, that you live overseas and your sibling required surgery resulting in a number of months of being unfit for work.
However, these circumstances are of a different nature to the situations in which the Commissioner can exercise his discretion. Having considered the relevant circumstances, the Commissioner will not exercise his discretion and extend the two year time limit.
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