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Edited version of your written advice
Authorisation Number: 1013121465197
Date of advice: 10 November 2016
Ruling
Subject: Capital gains tax - deceased estate
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 period
Year ended 30 June 20YY
The scheme commenced on
1 July 20XX
Relevant facts and circumstances
The deceased passed away.
The dwelling was the deceased's main residence, and had not been used for income producing purposes.
The property had been rezoned as infrastructure and there was a partial purchase of land made by a Government body.
There are two dwellings on the estate land.
A request was made by the deceased with council to return the property back to low density residential zoning.
As a term of the will, a portion of the land holding one house was to be subdivided and title transferred to another person.
Probate was granted.
Council approved rezoning of the land.
Subdivision of the property, as requested in the will, was completed.
The remaining property from the estate was marketed and an offer accepted.
Contracts were exchanged.
The date for settlement has been set.
The portion for which you are requesting the exemption is the main residence and the accompanying X acres.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 subsection 118-130(3)
Income Tax Assessment Act 1997 section 118-195
Reasons for decision
A capital gain or capital loss may be disregarded under section 118-195 of the ITAA 1997 where a capital gains tax event happens to a dwelling if it passed to you as an individual and a beneficiary of a deceased estate or you owned it as the trustee of the deceased estate.
For a dwelling acquired by the deceased prior to 20 September 1985, you will be entitled to a full exemption if:
● the dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of the following individuals:
● the spouse of the deceased immediately before death (except a spouse who was living permanently separately and apart from the deceased)
● an individual who had a right to occupy the dwelling under the deceased's will, or
● an individual beneficiary to whom the ownership interest passed and the CGT event was brought about by that person, or
● your ownership interest ends within two years of the deceased's death.
However, subsection 118-195(1) of the ITAA 1997 confers on the Commissioner discretion to extend the two year exemption period.
The following is a non-exhaustive 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.
Having considered the relevant facts, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow a further extension to the two year time limit.
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