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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of private advice

Authorisation Number: 1012636211235

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 ending 30 June 2014

The scheme commences on

1 July 2013

Relevant facts and circumstances

Your relative (the deceased) acquired a property prior to 20 September 1985 and it was their main residence.

The deceased died during the relevant financial year. There was a delay in obtaining a death certificate because the doctor attending to the deceased was unavailable.

You and your relatives are the beneficiaries of the will.

It was difficult to arrange an appointment with your solicitor as they were unavailable. You eventually met with you solicitor to have the will read and to seek probate.

Probate was granted during the relevant financial year.

You and your relatives became entitled the property in the subsequent financial year.

The property has never been used to produce assessable income.

You and your relatives attempted to dispose of the property by auction but you did not receive an acceptable price.

You and your siblings have entered into a contract for sale with settlement to occur on its disposal more than 2 years after the deceased's date of death.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 118-130(3)

Income Tax Assessment Act 1997 section 118-195

Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision

Subsection 118-195(1) of the ITAA 1997 allows you to disregard a capital gain (or loss) made on the disposal of a property acquired from a deceased estate, if certain conditions are satisfied. The conditions relevant to your circumstances are:

    • the deceased acquired the ownership interest prior to 20 September 1985, and

    • your ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner.

In this case the deceased acquired a property prior to 20 September 1985. This property was their main residence until they passed away in the relevant year.

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

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, there was a delay in obtaining a death certificate and arranging the reading of the will with the solicitor. We accept that these delays were beyond the control of you and your relatives.

Probate was granted and you and your relatives were granted ownership of the property in the subsequent financial year. The property was put up for auction, but this was unsuccessful. The property was never used to produce assessable income.

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.