| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1051255888813
Date of advice: 21 July 2017
Ruling
Subject: Capital gains tax and commissioner's discretion for deceased estates
Question 1
Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA1997) in relation to the property?
Answer
No.
This ruling applies for the following periods:
Year ending 30 June 2003
Year ending 30 June 2004
Year ending 30 June 2005
Year ending 30 June 2006
Year ending 30 June 2007
Year ending 30 June 2008
Year ending 30 June 2009
Year ending 30 June 2010
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commences on:
1 July 2002
Relevant facts and circumstances
The deceased purchased the property before 20 September 1985.
The property was less than 2 hectares and was used as their main residence and for activities since its purchase.
They lived at the property with their spouse until they died in 19AA.
In their Will the deceased left their entire estate on trust providing a life interest to their spouse.
Their Will also stated that after the death of their spouse the trustees were to sell the property.
Probate was granted in 19BB and the property was valued at $XX.
The spouse lived in the property as their main residence until their death in 20CC.
More than 2 years after the spouse’s death developers commenced subdividing land around the property into small building allotments.
Several years later you received notification from a government authority that they were going to resume a portion of the property by compulsory acquisition.
You then sought compensation for the compulsory acquisition in the Court and were awarded an amount.
The government authority lodged an objection to the amount of compensation awarded. However, they made a part payment.
They lodged an appeal to the Relevant Court. The balance of the compensation was withheld pending the outcome of the appeal.
The Court of Appeal upheld the original decision of the Court. This decision was handed down in 20GG.
The balance of the compensation, with interest, was paid in late 20GG.
The remaining portion of the property, on which the dwelling sat, was subdivided from the land compulsorily acquired.
The remainder of the property was sold in 20XX for $XX.
The property was never leased for rental income purposes.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-195
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 deceased acquired the property before 20 September 1985. The property was the main residence of the deceased until they passed away in 19AA.
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, there has been no challenge to the will, the estate was not complex, there were no unforseen or serious personal circumstances the prevented the sale, and the delay in selling the property is not due to circumstances beyond the beneficiary or trustee’s control.
Having considered the relevant circumstances, the Commissioner will not exercise his discretion and extend the 2 year time limit.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
