Edited version of your private ruling

Authorisation Number: 1012585303728

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

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 and their late spouse owned a property which was purchased before 20 September 1985.

This property was the main residence of the deceased and their late spouse.

Their late spouse passed away after 20 September 1985. At this point in time, the deceased acquired their late spouse's interest in the property.

The deceased continued living in the property until they passed away.

The property has never been used to produce income.

Probate was granted in the relevant financial year.

The property was placed on the market for sale in the relevant financial year.

An offer was made and accepted by the executors in the relevant financial year.

Settlement was delayed and the sale eventually fell through.

Another contract of sale was entered in during the subsequent financial year.

The property was sold and settlement occurred more than 2 years after the deceased passed 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 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).

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

The deceased and their late spouse purchased the property before 20 September 1985. The deceased inherited their late spouse's ownership interest in the property when they passed away after 20 September 1985. It was the deceased's main residence until they passed away.

In this case, the contract of sale fell through due to circumstances beyond the control of the executors of the estate. Further, settlement of another contract of sale was delayed by the purchaser.

Having considered the relevant circumstances, the Commissioner will exercise his discretion and extend the 2 year time limit.