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Edited version of your private ruling
Authorisation Number: 1012439298967
Ruling
Subject: CGT - deceased estate - 2 year extension.
Question 1
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 the relevant financial year?
Answer
Yes
This ruling applies for the following periods
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts and circumstances
The deceased died in year ended 30 June 20XX intestate.
Probate was granted in year ended 30 June 20YY.
There are no known beneficiaries to date.
The only asset of the estate was the deceased's house (the property). The property was the principal residence of the deceased prior to the date of death.
The deceased inherited the property as a beneficiary under a relative's will. The deceased never transferred the title of the property to him/herself after the relative's death.
The trustee has had difficulty confirming the deceased's ownership of the property.
The trustee has had to convert the property's title prior to transferring the property into the deceased's estate. This conversion of title occurred in year ended 30 June 20ZZ.
A submission to sell the property was made in year ended 30 June 20ZZ.
The property was listed in a contract for sale in year ended 30 June 20ZZ and settlement occurred a number of months later.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 118-195(1)
Reasons for decision
As per subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997), a capital gain or capital loss you make from a capital gains tax (CGT) event that happens in relation to a dwelling, or your ownership interest in it, is disregarded if:
(a) you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and
(b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied.
Beneficiary or trustee of deceased estate acquiring interest | |||
Item |
One of these items is satisfied |
And also one of these items | |
1 |
the deceased *acquired the *ownership interest 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 |
your *ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner | |
........... | |||
2 |
the deceased *acquired the *ownership interest before 20 September 1985 |
the *dwelling was, from the deceased's death until your *ownership interest ends, the main residence of one or more of: | |
|
|
(a) |
the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or |
|
|
(b) |
an individual who had a right to occupy the dwelling under the deceased's will; or |
|
|
(c) |
if the *CGT event was brought about by the individual to whom the *ownership interest *passed as a beneficiary - that individual |
In this case, when the deceased died intestate, the trustee has had to apply to the court to determine the beneficiary/beneficiaries of the property. The property was not used to produce assessable income and it was the deceased's main residence prior to death.
The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion to extend the time period in which you can dispose of the property:
· 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 (eg 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 reasons outside the beneficiary or trustee's control.
In determining whether or not to grant an extension the Commissioner is expected to consider whether, and to what extent, the dwelling is used to produce assessable income and how long the trustee or beneficiary held it.
In this case, the delay was caused by the complexity of the deceased's estate. The administration of the deceased's estate could not be finalised until the property was transferred into the deceased's estate, and the title of the property converted. Due to the complexity of these administrative problems, the administration of the deceased's estate has been delayed. Furthermore, because the deceased died intestate, the trustee must apply to the court to determine the beneficiary/beneficiaries of the property. These delays have prevented the trustee from disposing of the property within the two year time limit. The property was never used to produce assessable income.
Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit to year ended 30 June 2013.