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Edited version of your written advice
Authorisation Number: 1051244893222
Date of advice: 4 July 2017
Ruling
Subject: Capital gains tax
Question 1
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 June 201X for the Administrator to dispose of the property?
Answer
Yes
Question 2
Will any capital gain made by the Administrator on the disposal of the property on or before June 201X be disregarded?
Answer
Yes
This ruling applies for the following period
Financial year ending 30 June 201X
The scheme commences on
1 July 201Y
Relevant facts and circumstances
The deceased died intestate in 201Z.
At the time of their death, the deceased was the sole owner of the property. The deceased lived in the property as their main residence. The deceased did not treat any other property as their main residence prior to their passing. The property has not been used to produce assessable income.
A divorce was finalised between the deceased and their spouse prior to their passing. Family Court proceedings in relation to the assets of the marriage were not finalised prior to the deceased’s passing. The Administrator of the deceased estate was substituted for the deceased in the Family Court proceedings as the deceased’s legal personal representative.
To date, the Administrator has been prevented from disposing of the property for the following reasons:
● the deceased died intestate and a dispute arose as to who should be appointed administrator of their estate;
● the Administrator necessarily became a party to the Family Court proceedings;
● due to the nature of the proceedings until recently it has been unclear as to what entitlements the various parties have; and
● the Administrator has been waiting for the Family Court proceedings to be finalised before dealing with the assets of the estate.
In the 2018 financial year, the Family Court will make orders that the property be sold by the Administrator and the proceeds distributed.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-145
Income Tax Assessment Act 1997 section 118-195
Reasons for decision
Under subsection 118-195(1) of the ITAA 1997, a capital gain or capital loss you make from a capital gains tax (CGT) event that happens in relation to a dwelling (or your ownership interest in it) is disregarded if you owned it as the trustee of a deceased estate, and
● 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 acquired by the deceased after 20 September 1985 and was the deceased’s main residence.
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 this case, the Administrator has been prevented from disposing of the property within the two year period due to delays in the completion of the administration of the estate and ongoing Relevant Court proceedings. The Administrator will end their ownership interest in the property by sale in the 201X financial year.
Having considered the circumstances and the relevant factors, the Commissioner will exercise their discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time until June 201X for the Administrator to dispose of the property.
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