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Edited version of your written advice
Authorisation Number: 1051326315127
Date of advice: 12 January 2018
Ruling
Subject: Deceased estate dwelling
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 to XXXX?
Answer
Yes.
This ruling applies for the following period
Year ending 30 June 20XX
The scheme commenced on
1 July 20XX
Relevant facts
A testamentary trust came into existence under a will.
Probate was granted.
There were no income-producing assets passing to the Trust as a result of the death, the principal asset being a freehold property which was the deceased’s main residence until their death. The deceased had purchased the property before 19XX. No one lived in the property after the death.
The trustee set about the duties in order to realise the property.
This proved to be a difficult task for several reasons.
The trustee managed to arrange for the property to be auctioned with settlement within Y years of the death.
The property was sold before auction, however the purchaser wanted a X month settlement and following negotiations, finally agreed to Y months, resulting in the contract being signed with settlement soon after the two year period.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-195
Detailed reasoning
Subsection 118-195(1) of the Income Tax Assessment Act 1997 (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 or within a longer period allowed by the Commissioner.
In this case, the property was acquired by the deceased before 20 September 1985.
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 property passed to the testamentary trust under the will.
The words 'trustee of a deceased estate' as used in section 118-195 of the ITAA 1997 are not limited to a legal personal representative but include the trustee of a testamentary trust.
Having considered the circumstances and the relevant factors in this case, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time until XXXX.
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