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Edited version of your written advice
Authorisation Number: 1051176249376
Date of advice: 21 December 2016
Ruling
Subject: CGT - deceased estate - extension of time
Question 1
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 ending 30 June 201X
The scheme commences on:
1 July 201X
Relevant facts and circumstances
The deceased passed away in 201X.
The deceased inherited the property in 199X, it was their main residence.
The deceased resided in the property with your sibling.
In 201X, the property was transferred into your name as per the deceased's Will.
In 201X, your sibling disputed the Will and refused to vacate the property.
Probate for the estate was received on 201X.
Your sibling vacated the premises on 201X.
The property was sold at auction outside the two year period.
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, 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 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; or the property was acquired by the deceased before 20 September 1985; and
● your ownership interest ends within two years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
In your case, the property will not be sold within the two year time limit. Therefore, you will only be able to disregard the capital gain from the sale of the property if the Commissioner grants an extension to 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 due to the Will being challenged and your sibling failing to vacate the property.
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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