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Edited version of your written advice
Authorisation Number: 1051214325928
Date of advice: 19 April 2017
Ruling
Subject: Capital gains tax - extending two year time period
Question 1
Will the Commissioner exercise discretion under section 118-195 of the Income Tax Assessment
Act 1997 and extend the two year time period until DDMMYY?
Answer
Yes
This ruling applies for the following period:
Year ending 30 June 2017
The scheme commences on:
1 July 2015
Relevant facts and circumstances
In late 201X, your parent (the deceased) passed away.
Under the Will after payment of deceased's debts, funeral and testamentary expenses, the residue of the deceased's estate both real and personal is payable to you.
You inherited the main residence (the property).
In late 201X a family member became quite ill.
You attended to your family responsibilities during this period of time.
In mid 201Y, Probate was granted.
In mid-late 201Y, certificate of title for the property was transferred to you.
In late 201Y, certificate of title sent from estates lawyer.
In mid-late 201Z, contract of sale signed.
In DDMMYY, settlement occurred.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 118-195
Income Tax Assessment Act 1997 subsection 118-195(1)
Reasons for decision
Capital gains tax (CGT) event A1 happens when you dispose of a CGT asset, as established in Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997).
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 two years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
You will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the two 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
Application to your circumstances
In your case, the property was purchased by the deceased and was their main residence until they passed away. The property was not sold within two years of the deceased's date of death. The delay was caused by circumstances outside your control.
Having considered your personal circumstances, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time until DDMMYY.
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