Edited version of your written advice

Authorisation Number: 1012772621646

Ruling

Subject: CGT - 2 year extension

Question

Will the Commissioner exercise the 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?

Yes

This ruling applies for the following period(s)

Year ended 30 June 2015

The scheme commences on

1 July 2014

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 owned a house purchased post 1985 and it was the main residence just before death.

The dwelling was never used for income producing purposes.

Probate was granted seven months are date of death and the dwelling was transferred to you.

The dwelling remained vacant from date of death until it sold.

The property was sold and settlement occurred in the year ended 30 June 2015.

The reason why you delayed placing the property on the market was because you had difficulties dealing with your mother's death and you had significant medical issues not only personally but also your spouse who then passed away within X years of your parent's death.

Following the death of your parent and your spouse you suffered a heart attack and needed to re-locate to be looked after by a relative. You are elderly yourself and together with the factors discussed above, you were not able to deal with the estate in a timely manner.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

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

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a trustee of a deceased estate to disregard a capital gain or capital loss made from a Capital Gains Tax (CGT) event (ie. sale of the property) that happens in relation to a dwelling where:

The ownership of the dwelling passed to the trustee of the deceased estate on the owner's death,

The deceased person died after 20 August 1996,

The deceased acquired the dwelling before 20 September 1985, and

The dwelling was the deceased person's main residence just before death.

You meet the above requirements. Therefore, you may be eligible to disregard the capital gains tax if:

• you dispose of your interest in the dwelling within two years of the deceased's death, or within a longer period allowed by the Commissioner.

A trustee of a deceased estate may apply to the Commissioner to grant an extension of the two year time period, where the CGT event happens in the 2008-09 income year or later income years. Generally, the Commissioner would exercise the discretion in situations where the delay is due to circumstances which are outside of the control of the beneficiary or trustee, for example:

• 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.

These examples are not exhaustive.

In exercising the discretion the Commissioner will also take into account whether and to what extent the dwelling is used to produce assessable income and for how long the trustee or beneficiary held the ownership interest in the dwelling. 

For the reasons you provided, the delay in selling the dwelling falls into the examples stated above and as such 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.