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Edited version of your private ruling
Authorisation Number: 1012486446204
Ruling
Subject: Commissioner's discretion
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 for properties B, C, E and F?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2013
The scheme commences on:
1 July 2012
Relevant facts and circumstances
For some time prior to their death, the deceased suffered from a mental disorder.
During this time, a new will was created.
The deceased's will was challenged based on their medical state prior to their death.
The will was found not to be legitimate and Letters of Administration were granted.
The deceased owned six properties:
A - The deceased's principle place of residence. Purchased prior to xx September 1985.
B - Rental property purchased prior to xx September 1985. This property was subject to a lease. The tenant was offered help to relocate in the hope that he would vacate before the lease period expired, but the offer was not accepted.
C - Rental property purchased prior to xx September 1985. This property was subject to notice to vacate timeframes.
D - Rental property purchased prior to xx September 1985.
E - Rental property purchased prior to xx September 1985.
F - Rental property purchased prior to xx September 1985. This property was subject to notice to vacate timeframes.
Settlement of the properties occurred over two years after the deceased's death.
The notice to vacate the properties was unable to be issued until the legal proceedings were resolved.
You have suffered from an illness. Your ongoing medical treatment requires an annual visit overseas where you receive specialist treatment. The trip was scheduled between the deceased's death and the settlement date of the properties.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-195
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 xx 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 xx 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, Letters of Administration were not granted until two months prior to the end of the exemption period. The deceased's interest in the properties was acquired prior to xx September 1985.
The properties were 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 properties 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 (e.g. 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.
Application to your circumstances
In this case, after the deceased passed away their will was challenged and, after legal action, Letters of Administration were granted.
Due to delays caused by the legal action, notice to vacate restrictions and medical issues the properties were unable to be sold within two years of the deceased's death.
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 2 year time limit.