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Edited version of your private ruling
Authorisation Number: 1012489689832
Ruling
Subject: Capital gains tax
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?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 2013
The scheme commences on:
1 July 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 20XX.
You are executor of the estate.
A letter was received from an ex spouse challenging the will.
The ex spouse did not follow through on the challenge. However, execution of the will was delayed while you waited to see if the ex spouse would appeal probate.
Probate was granted in 20XX.
A property was purchased by the deceased after 20 September 1985 and was the deceased's principal place of residence until their death.
At the date of the deceased's death, the property was occupied by a child of the deceased. It was the deceased's wish (however, it was not written into the will) that the child be able to remain in the property while they underwent treatment for a medical condition. The child moved out in 20XX.
In 20XX, you were requested by the deceased's neighbour that the property be made available to her relatives who lost their home in a disaster. You were paid rent until they moved out in 20XX.
In 20XX another of the deceased's children lost their partner to illnes.
The property was first listed for sale in 20XX. It was taken off the market in 20XX. It was relisted in 20XX. There were a number of contracts for sale for the property which fell through.
The property sold in 20XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 118-195(1).
Reasons for decision
Summary
Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension to the two year time limit.
Detailed reasoning
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 the property after 20 September 1985. They passed away in 20XX. The property was their main residence and had not been used to produce assessable income just before their death. The property was then rented out and used to produce assessable income.
The two year time period to dispose of the property expired in 20YY. Therefore, you will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the time period.
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.
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.
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.