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Edited version of your written advice
Authorisation Number: 1012738422778
Ruling
Subject: Main residence exemption
Question
Will the Commissioner exercise his discretion under paragraph 118-195(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the 2 year period?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2013
Year ended 30 June 2014
Year ending 30 June 2015
Year ending 30 June 2016
The scheme commences on
1 July 2012
Relevant facts and circumstances
The deceased passed away during the relevant financial year.
The last Will and Testament of the deceased expressly provided that their main residence not be sold for a value any lower than that specified in the Will.
In endeavouring to adhere to the deceased's wishes, the executors have found it impossible to secure a sale at the nominated selling price.
This has been due to the fact that because of market conditions, property values in the area have experienced a market downturn.
The property has not been tenanted pending sale and was the deceased's main residence prior to their death.
The estate has no other assets apart from the property in question.
Relevant legislative provisions
Income Tax Assessment Act 1997 paragraph 118-195(1)(b)
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).
The Commissioner can exercise his discretion to extend the 2 year period 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, the Will of the deceased required the property be sold for a certain value. This has caused delays as the executors have been unable to secure a sale at the nominated selling price. There has been no challenge to the will, the estate was not complex and the information provided has not shown that there were unforeseen circumstances that prevented the sale of the property.
While we appreciate your circumstances, the delay is of a different nature to the situations in which the Commissioner can exercise his discretion. Having considered the circumstances, the Commissioner will not exercise his discretion and extend the 2 year time period.