| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1013119633398
Date of advice: 4 November 2016
Ruling
Subject: Capital gains for a deceased estate
Question
Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 ('ITAA 1997') in relation to the property and allow an extension of time until late 20XX?
Answer
Yes.
This ruling applies for the following period(s)
Year ending 30 June 20YY
The scheme commences on
1 July 20XX
Relevant facts and circumstances
The deceased passed away on XX MM 20VV.
They deceased had no will in place at their death.
The deceased's main residence formed part of the estate.
The deceased purchased the property on XX MM 19ZZ.
The property was not used to earn assessable income after the deceased's date of death.
Application for Probate was made on XX MM 20WW, and granted XX MM 20WW.
The administrators and beneficiaries of the estate are the deceased's children, A and B.
The administrators of the estate were unable to locate the title of the property, thereby necessitating obtaining a replacement title.
A new fence was installed prior to the sale of the property.
The property was listed for sale, and a contract of sale was received XX MM 20XX. Settlement occurred in XX MM 20XX.
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 property is 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 your case, the property was purchased by the deceased before 20 September 1985 and was their main residence until they passed away on XX MM 20VV. The property was not sold within 2 years of the deceased's date of death.
You will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the 2 year time period.
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
When the deceased passed away, they did so intestate thereby increasing the complexity of administering the estate. Considering this circumstance in conjunction with the factors outlined above, the Commissioner is able to apply his discretion and allow an extension of time until late 20XX.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
