Edited version of your written advice

Authorisation Number: 1051212692239

Date of Advice: 10 April 2017

Ruling

Subject: CGT - deceased estate - 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 allow an extension of time to the two year period to XX February 20XX?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

The deceased acquired the property prior to 20 September 1985.

The property was the deceased's main residence from acquisition until his death.

The Public Trustee administered the estate.

The administration of the estate took from the deceased's death to XX October 20XX to be completed. The delay in administration was due to complexities in administration.

The Property was transferred to you and the other beneficiaries on XX August 20XX.

The property was placed on the market and a contract of sale was signed on XX January 20XX and settlement occurred on XX February 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 (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 after 20 September 1985 and was their main residence until they passed away on XX January 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 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 XX February 20XX.

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