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Edited version of your private ruling
Authorisation Number: 1012441719022
Ruling
Subject: Extension of time
Question
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?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2012
Year ending 30 June 2013
The scheme commences on:
1 July 2011
Relevant facts and circumstances
The deceased passed away in the 200X financial year.
At this time the deceased was a resident of a care facility.
The deceased owned a residence which was purchased prior to 20 September 1985. They did not own any other properties.
The property was rented out from the 200Y financial year.
Probate was granted in the 200Z financial year by resolution of the Supreme Court.
The delay in probate being granted was due to the fact that the deceased had made a number of separate wills. Each of these wills named different individuals as executor of the estate.
Once probate was granted, the property was put on the market for sale.
A relative of the deceased contested the will.
The property was withdrawn from the market by the co-executors at this time pending the outcome from the Supreme Court.
A Supreme Court trial date was set and the matter was resolved in the relevant financial year.
At this point in time the property was again put on the market for sale.
Settlement of the property occurred on in the relevant financial year.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-195(1).
Reasons for decision
As per subsection 118-195(1) of the 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 the deceased acquired a property before 20 September 1985. The property passed to the executors of the estate upon probate being granted.
The property was sold outside the two year period outlined in subsection 118-195(1) of the ITAA 1997. Therefore, you will only be able to disregard the capital gain from the sale of the property if the Commissioner grants an extension to the 2 year time limit.
The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion:
· 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.
Having considered the relevant facts, we consider that the deceased estate was complex which in turn delayed the administration of the estate. Therefore, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the 2 year time limit.