Edited version of your private ruling

Authorisation Number: 1012574871104

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 period?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2012

Year ended 30 June 2013

Year ending 30 June 2014

The scheme commences on

1 July 2011

Relevant facts and circumstances

The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are:

· the application for private ruling, and

· the documents provided with the application for private ruling.

Your late relatives purchased a property before 20 September 1985. This property was their main residence.

Your relatives passed away after 20 September 1985, and your other relative became the sole owner of the property.

Your relative resided in the property until they passed away in the 2011-12 financial year.

You and your sibling each inherited an interest in the property.

Your late relative and sibling owned another property as tenants in common. This property was used as a holiday house.

When your late relative passed away you and your sibling inherited their interest. Your sibling now owns X% of the property.

Your sibling intends to purchase your share of the main residence, but needs to sell the other property to fund the purchase.

It was always your sibling's intention to sell the other property as soon as possible, but it required considerable work to make it presentable for sale.

Your sibling encountered many delays due to the property's location.

This property is on the market for sale, but it is unlikely to sell and settle within 2 years of the deceased passing away.

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 own 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 before 20 September 1985, or

· the property was acquired by the deceased 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, and

· your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).

In this case, the deceased acquired an interest in the property in prior to 20 September 1985. The deceased acquired a further interest in the property when their relative passed away after 20 September 1985. The property was the main residence of the deceased until they passed away.

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

You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed).

Application to your circumstances

In this case, you inherited an interest in the main residence after your relative passed away. Your sibling intends to purchase your ownership interest, however they do not have sufficient funds. Your sibling needs to sell another property in order to fund the purchase and this will not take place within 2 years of the deceased passing away.

In this case, there has been no challenge to the will, the estate was not complex, there were no unforseen or serious personal circumstances the prevented the sale, and the delay in selling the property is not due to circumstances beyond the beneficiary or trustee's control.

While we appreciate your circumstances, your sibling's need to sell another property to fund the purchase of your interest in the main residence is of a different nature to the situations in which the Commissioner can exercise his discretion. Having considered the relevant circumstances, the Commissioner will not exercise his discretion and extend the 2 year time limit.