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Edited version of private advice
Authorisation Number: 1051633496259
Date of advice: 27 February 2020
Ruling
Subject: The Commissioner's discretion to extend the two year period for main residence exemption
Question
Will the Commissioner allow an extension of time under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for you to dispose of your ownership interest in the dwelling?
Answer
Yes.
Having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time. Further information about this discretion can be found by searching 'QC 52250' on ato.gov.au
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
The deceased passed away on xx xxx xxx.
The deceased lived at a property. The deceased had obtained a half share in the property after the finalisation of Supreme Court proceedings in 20XX.
The remaining half of the property was inherited by a relative who did not live at the residence.
Due to their disabilities the deceased had always lived in the property with the parent and the deceased continued to live in the property after the parent's death.
This property had been the deceased's main residence at the time of their death and had never been used for income producing purposes.
Following the Deceased's passing the application for probate was contested. This matter was not resolved and litigation commenced on xx xxx xx seeking Probate of the deceased's will.
Relatives of the deceased commenced separate legal proceedings to challenge the validity of the will and lodging applications for probate.
On xx xxx xxx Short Minute Orders were issued appointing Trustees of the contested estate.
On xx xxx xxx the court granted administration of the estate to the Trustees.
A contract for sale was entered into on xx xxx xxx with settlement occurring on xx xxx xxx.
Because the delay in disposing of the property was caused by the complexity of the estate (including uncertainty about the will and the multiple legal proceedings ) and the property was listed and sold as soon as practicable after those issues were solved the Commissioner is able to exercise his discretion to extend the two years main residence exemption.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 118-195(1)
Further issues for you to consider
A full main residence exemption can only apply if the dwelling is on land of 2 hectares or less. However, a partial exemption is available in circumstances where the land is more than 2 hectares.
In this case as the property was more than 2 hectares, a partial main residence exemption is available. Therefore, only a portion of the capital gain can be disregarded.
Additional information
Taxation Determination TD 1999/67 considers how to calculate a partial main residence exemption where the land exceeds 2 hectares. For more information, search for TD 1999/67on www.ato.gov.au.
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