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Edited version of your written advice
Authorisation Number: 1013122997023
Date of advice: 10 November 2016
Ruling
Subject: CGT - deceased estate - extension of 2 year exemption
Question 1
Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and extend the 2 year period until 20ZZ?
Answer
Yes.
This ruling applies for the following period:
The year ending 30 June 20YY
The scheme commenced on:
01 July 20XX
Relevant facts and circumstances
The deceased passed away in 20VV.
The deceased used the property as their man residence for the entire ownership period.
The property was never used for income producing purposes.
The deceased died intestate.
Grant of Administration was issued many months later, in 20WW.
Appropriate measures were made to facilitate and expedite the sale of the property by the administrator.
Structural repairs needed to be completed before it was placed on the market.
The contract was signed in 20XX and settlement was in 20YY.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-195(1)
Reasons for decision
Subsection 118-195(1) of the ITAA 1997 provides a capital gains tax (CGT) exemption to a beneficiary or trustee of a deceased estate where a CGT event happens to a dwelling (or an ownership interest in a dwelling) acquired from a deceased estate.
An exemption is provided where the beneficiary or trustee's ownership interest in the dwelling ends within two years of the deceased's death and just before the deceased's death (for pre-CGT dwellings) the dwelling was their main residence.
The Commissioner has discretion to extend the two year time period in subsection 118-195(1) of the ITAA 1997 where the trustee or beneficiary of a deceased estate's ownership interest ends after two years from the deceased's death. This discretion may be exercised in situations such as where:
1. the ownership of a dwelling or a will is challenged;
2. the complexity of a deceased estate delays the completion of administration of the estate;
3. 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
4. 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 this case, the deceased died intestate resulting in a delay to gain a Grant of Administration. The Administrator took the necessary steps to sell the property. As a result the settlement occurred months after the two year period.
Having considered the relevant facts, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit until 20YY.
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