Edited version of private ruling

Authorisation Number: 1011689952153

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Ruling

Subject : Commissioner's discretion - disposal of property from deceased estate

Question and Answer

Does the Commissioner have the discretion to allow an extension of time for the disposal of property from a deceased estate?

No.

This ruling applies for the following period

1 July 2010 to 30 June 2011

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

The deceased passed away in a particular year.

You are a beneficiary of the estate.

The property is residential.

In a subsequent year some of the house was damaged by a storm.

Repairs to the ceiling were completed in 20XX.

Until all the repairs were completed you could not sell the property.

You want an extension of time to sell the property and meet the main residence exemption from capital gains tax.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 102-20

Income Tax Assessment Act 1997 Section 118-95

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

Income Tax Assessment Act 1997 Section 118-200

Income Tax Assessment Act 1997 Section 128-15

Reason for decision

A person makes a capital gain or a capital loss if and only if a capital gains tax (CGT) event happens to a CGT asset (see section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997)).

Generally, assets a person inherits through a deceased estate are acquired on the date of death (see section 128-15 of the ITAA 1997).

In certain circumstances subsection 118-195(1) of the ITAA 1997 allows a capital gain or loss to be completely disregarded when a CGT event happens to a deceased person's main residence that a person acquired as a trustee or beneficiary of a deceased estate.

While the deceased acquired the dwelling on or after 20 September 1985, the dwelling was the deceased's main residence just prior to their death and has not since been used since to produce assessable income. The capital gain or capital loss can be disregarded if:

You are an individual and the ownership passed to you as a trustee or beneficiary of a deceased estate, and any of the following apply:

· your ownership interest ends within 2 years of the person's death;

· from the deceased's death until your ownership interests ends, the dwelling was the main residence of one or more of:

o the spouse of the deceased immediately before death,

o an individual who had a right to occupy the dwelling under the deceased's will, and

o the taxpayer as a beneficiary if they are disposing of the dwelling as a beneficiary.

The Commissioner can only exercise, or refuse to exercise, a discretion when he is given that discretion in legislation that he administers. There is nothing contained in the legislation to give the Commissioner discretion to allow you an extension of time beyond the two year deceased main residence exemption.

However, if the property is sold after the two years have elapsed from date of death then a partial exemption from CGT may be available.

Partial Exemption from CGT

Where section 118-195 of the ITAA 1997 does not apply, a partial main residence exemption may still be available under section 118-200 of the ITAA 1997 if an ownership interest in a dwelling passed to you as a beneficiary in a deceased estate.

A partial main residence exemption will apply when you dispose of your ownership interest in the property. Partial exemption can be calculated using the following formula:

Capital gain or capital loss         x          non-main residence days

                                                                        total days

Non-main residence days are the total number of days that the dwelling was not the main residence of one of the following:

· the deceased;

· the spouse of the deceased; or

· an individual who had the right to occupy the dwelling under the deceased's will.

Total days are the sum of the number of days between the date of the deceased passing away and the date of the sale of the dwelling.