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Edited version of your written advice
Authorisation Number: 1012737446650
Ruling
Subject: capital gains tax
Question 1
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.
Question 2
Are you entitled to a full main residence exemption under section 118-195 of the ITAA 1997?
Answer
No.
This ruling applies for the following period
Year ending 30 June 2015
The scheme commences on
1 July 2014
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 last will and testament of the deceased.
Individual A and B purchased a property prior to 1985.
It was continuously used as a main residence.
Individual A passed away and individual B passed away some time later.
One of the beneficiaries had been living in the property. The beneficiary continued to live in the property and treat it as their main residence.
The property has never been used to produce assessable income.
The last will and testament of the deceased gave the executors the power to delay the sale of assets of the estate.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-195
Income Tax Assessment Act 1997 subsection 118-195(1)
Reasons for decision
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 property was the deceased's main residence until they passed away. One of the beneficiaries had been living in the property and continued to live in the property as their main residence after the date of death. While the will allowed the executors to postpone the sale of the property, it did not expressly grant any beneficiary the right to occupy the dwelling. Therefore, we do not consider condition (b) outlined above has been satisfied.
You will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the 2 year time period.
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
Application to your circumstances
In this case, there has been no challenge to the will, the estate was not complex and the material provided had not shown that there were unforeseen circumstances that prevented the sale of the property. We do not consider the delay in selling the property is due to circumstances beyond the control of the trustee.
While we appreciated your circumstances, the delay 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. Therefore, you are not entitled to disregard the capital gain (or loss) made from the sale of the property.