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Ruling

Subject: Capital gains tax - deceased estate - Commissioner's discretion two-year rule

Question:

Will the Commissioner exercise his discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the two year period until the settlement of the contract for disposal?

Answer:

Yes.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

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.

Prior to 20 September 1985, the deceased purchased a dwelling (the property).

The property was their main residence at the time of their death more than two years ago.

The property has not been occupied since their death.

At the time of their death, the deceased's family member (person A) was extremely ill and was undergoing medical treatment.

The deceased's family had to continue focussing all their attention on person A.

Person A and the deceased's child (child A) occupied a property of more than X acres and were both isolated within the home.

The family had to rally to help person A and child A until person A passed away.

The deceased's family found it emotionally hard to deal with the deaths and the proceedings that followed.

The council capital value of the property was $X.

Early this year settlement occurred on the disposal of the property for $X as a development site.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 118-195.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Due to recent changes to section 118-195 of the ITAA 1997, the Commissioner now has discretion to extend the two-year period in the Act where:

· the ownership of a dwelling or 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 unforseen 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 for sale over the dwelling is unexpectedly delays or falls through for circumstances outside the beneficiary or trustee's control.

In your situation, person A was suffering from a medical condition and was undergoing extensive medical treatment until their death. The family of the deceased and person A found it emotionally hard to deal with the deaths and the proceedings that followed.

Accordingly, as you meet the criteria the Commissioner will exercise his discretion to extend the two-year period in which a deceased's main residence must be disposed of to the date the contract of sale settled.