Edited version of private advice

Authorisation Number: 1051812186278

Date of advice: 9 March 2021

Ruling

Subject: CGT - deceased estate - two-year discretion

Question

Will the Commissioner exercise his discretion under subsection 118-195 (1) of the Income Tax Assessment Act 1997 and allow an extension of the two-year period until settlement of the sale to dispose of the dwelling?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 2019

Year ending 30 June 2020

The scheme commences on:

1 July 2016

Relevant facts and circumstances

The Deceased owned a property (The Property).

The Deceased died in 20XX.Their children were appointed as The Executors.

Probate was granted in 20XX.

At the time of The Deceased's death, Person A was living at The Property. They were given notice to vacate The Property.

Shortly after, a Certificate of Title was issued with The Executors listed as joint tenants with a XX% ownership interest each.

Person A refused to vacate The Property.

The Executors filed a statement of claim for possession of the land.

Person A instituted court proceedings. They were seeking an amount to provide for their maintenance and advancement in life out of the Estate of The Deceased.

Consent orders were made in the relevant court.Person A was to receive a payment from The Estate of The Deceased in several instalments.They were ordered to vacate The Property within XX days of receiving the first instalment.

The Property was listed for sale shortly after. Contracts of sale were exchanged and settlement occurred.

Relevant legislative provisions

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

Reasons for decision

Summary

TheCommissioner will grant an extension of time until settlement to dispose of The Property.

Detailed reasoning

When you inherit a dwelling as a beneficiary of a deceased estate, you can disregard any capital gain on the sale of that dwelling, providing you sell the dwelling within two years of the death of the deceased and certain other conditions are met.

Generally, the Commissioner will allow a longer period where the dwelling could not be sold and settled within two years of the deceased's death due to reasons beyond your control that existed for a significant portion of the first two years. The circumstances where an extension may be granted include but are not limited to:

•   the ownership of the dwelling, or the will, is challenged

•   a life or other equitable interest given in the will delays the disposal of the dwelling

•   the complexity of the deceased estate delays the completion of administration of the estate, or

•   settlement of the contract of sale of the dwelling is delayed or falls through for reasons outside of your control

In your situation, following the Deceased's death, The Will was challenged. This challenge was present for a significant portion of the two years following the deceased's death. Once this challenge was resolved, The Property was placed on the market and sold in that month. Therefore, having considered the relevant facts and circumstances, the Commissioner will apply his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 and allow an extension to the two-year time limit until settlement of the sale.

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).