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This edited version has been archived due to the length of time since original publication.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: 1051281346680

Date of advice: 29 September 2017

Ruling

Subject: CGT – deceased estate – Commissioner’s discretion to extend the two year period

Question

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?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2017.

The scheme commences on

1 July 2016.

Relevant facts and circumstances

The deceased passed away in 201X.

The deceased acquired a dwelling in 200X (the dwelling).

The dwelling was the deceased’s main residence.

The executors of the deceased’s estate included the deceased’s child and the person who had prepared the deceased’s Will.

The deceased’s Will granted a right to reside in the dwelling to A and then the dwelling would pass to the deceased’s grandchildren as tenants in common in equal shares.

A moved into the dwelling immediately following the deceased’s death and resided in the dwelling until late 201Y.

A’s termination of the right to occupy was due to the deteriorated condition of the dwelling, it being too small for the occupation of children and the emotional stress suffered by A in residing in the deceased’s dwelling.

The dwelling remained vacant from the date of A’s termination of the right to occupy interest until the settlement of the sale of the dwelling.

The complexity of the wording in the deceased’s Will resulted in A seeking legal advice on the interpretation of the Will and whether to proceed with a family provision claim in the Supreme Court.

The relationship between A and the other executor of the deceased’s estate had deteriorated, with the latter seeking to resign and seeking to be indemnified from the proceeds of the sale against expenses incurred.

A contract for sale was entered into in mid 201Z to sell the dwelling, but an inspection report revealed considerable structural damage.

The condition of the premises delayed the sale of the dwelling, with renovations undertaken to repair structural defects to the dwelling caused by termite damage and internal water leaks.

Another contract for sale was entered in mid 201Z and a report of repairs completed was attached to this contract.

Settlement of the sale of the dwelling occurred in late 201Z.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 subsection 118-130(3)

Income Tax Assessment Act 1997 section 118-195

Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision

Summary

The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time.

Detailed reasoning

The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person’s estate sell that dwelling within two years of the date of death.

Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was:

The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the Will is challenged). There must not be any other factors mitigating against exercising it.

The delay in disposing of the dwelling was caused to a number of factors including:

The Commissioner accepts that it is appropriate to grant the short extension that you have requested.


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).