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Edited version of your private ruling
Authorisation Number: 1012532753778
Ruling
Subject: Commissioner's discretion
Question
Will the Commissioner exercise his discretion to extend the two year exemption period under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?
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
There were delays experienced before probate could be granted as there was difficulty in ascertaining all the deceased's assets, which made it necessary to do a physical search of the house to look for documents.
Arrangements were made with real estate agents for the sale of the main residence.
A number of offers were accepted however they were unsuccessful due to lack of finance.
The property was not used to produce assessable income after the deceased's death.
There has been a general downtown in the real estate market in this area for several years.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 118-195(1)
Reasons for decision
Subsection 118-195(1) of the ITAA 1997 states that if you are an individual who owns a dwelling in a capacity as trustee of a deceased estate, then you are exempt from tax on any capital gain made on the disposal of the property if:
· The property was acquired by the deceased on or after 20 September 1985 and the property 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; or the property was acquired by the deceased before 20 September 1985; and
· your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
The Commissioner can exercise his discretion in situations such as where:
· 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 (for example, 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 circumstances outside the beneficiary or trustee's control
The property was used as the deceased's main residence. It was not used for rental.
Due to a downturn in the real estate market and a lack of finance causing a number of accepted offers to be unsuccessful the property was not sold within the 2 year time limit.
In your case the Commissioner considers it appropriate to exercise his discretion to extend the 2 year time limit.
As a result of extending the two year time limit, you will satisfy all of the conditions contained in section 118-195 of the ITAA 1997. Accordingly, you can disregard any capital gain or loss that arises as a result of the disposal of the property.