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Edited version of your written advice
Authorisation Number: 1051179128378
Date of advice: 9 January 2017
Ruling
Subject: Capital gains tax 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 mid 20XX?
Answer
Yes
This ruling applies for the following period(s)
Year ending 30 June 20XX
The scheme commences on
1 July 20XX
Relevant facts and circumstances
The deceased passed away in mid-late 20XX.
The deceased's main residence ('the property') formed part of the deceased's estate. The deceased purchased the property in 20XX. The property has not been used to earn assessable income.
The deceased was subject to a Specific Order prior to their death.
Family disputes have arisen regarding the estate, and releasing the Order.
The deceased's estate was being administered by Relevant Trustee and Guardian ('Relevant Trustee').
The Trustee conducted a title search in mid 20XX, and valuations in mid-late 20XX.
The Order was released in early 20XX, releasing the estate to the Trustee for administration.
Probate was applied for in late 20XX, and granted in late 20XX.
The property was sold, with settlement occurring early 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 you own a dwelling in your 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 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).
In this case, the property was purchased by the deceased after 20 September 1985 and was their main residence until they passed away in 20XX. 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
Having considered the complexity in administering the estate, the Commissioner is able to apply his discretion and allow an extension of time the requested date.
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