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Edited version of your written advice
Authorisation Number: 1051203530099
Date of advice: 21 March 2017
Ruling
Subject: CGT - deceased estate - 2 year extension
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 dwelling on the property and allow an extension of time until early 20XX?
Answer
Yes
This ruling applies for the following period:
Year ending 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
The deceased died mid 20XX.
The deceased and another person purchased the property before 20 September 1985.
The deceased inherited the other person's interest in the property on their death.
The property was the deceased's main residence.
Under the deceased's Will the property was left to X children.
At the time of the deceased's death, one beneficiary was living in the dwelling.
Attempts to sell the property were thwarted by the beneficiary who refused to vacate the property.
Court proceedings were initiated to remove the beneficiary from the property to enable repairs to be completed allowing for the sale of the property.
A Court order was issued on mid 20XX ordering the beneficiary to vacate the property within 14 days of the order.
Probate was granted late 20XX.
Property settlement occurred on early 20XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-195.
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 (or it 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 this case, the property was purchased by the deceased and another person as tenants in common before 20 September 1985. The deceased then inherited the other person's interest in the property on the day the other person's death in mid 20XX. The dwelling was the deceased's main residence until the time of their death. 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 circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time until settlement early 20XX.
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