| Disclaimer This edited version has been archived due to the length of time since original publication.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. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012886731671
Date of advice: 30 September 2015
Ruling
Subject: Capital gains tax - deceased estate - Commissioner's discretion
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 by four months?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2016.
The scheme commenced on
1 July 2013.
Relevant facts and circumstances
The deceased and spouse bought the residential property at some time before 20 September 1985.
The deceased's spouse passed away at some time after 20 September 1985 and this ownership interest (50%) in the property was transferred to the deceased.
The deceased passed away during the 20XX income year.
The property was held by you as Trustees of the deceased's Estate from the date of death.
The Trustees consisted of the deceased's adult children.
The property was not sold within two years of the deceased's death but it is expected it will be sold with settlement occurring within 28 months of the date of death.
The house on the property was the deceased's main residence until they passed away.
The house was not rented out during the deceased's ownership period.
The delay in selling the property was due to the following reasons:
• The deceased passed away unexpectedly while the Executor of the Estate was overseas.
• The Trustees lived far apart from each other in parts of Australia and overseas.
• The combined absence of the Trustees made the task of cleaning, sorting the belongings and preparing the house for sale a difficult, prolonged and emotional process.
• There was a delay in probate of the will of three to four months which was out of the control of the Trustees.
• The delay in clearing the property combined with their collective absences meant that they were not able to present the house and conclude a sale within the two year timeframe.
Assumptions
The property will be sold as expected within 28 months of the date of death.
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
Explanatory memorandum to the Taxation Laws Amendment Bill (No.9) of 2011 (Cth)
Reasons for decision
Summary
The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time by four months.
Detailed reasoning
The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person's estate sell that dwelling within two years of the date of death.
Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was:
• Acquired by the deceased before 20 September 1985, or
• The deceased's main residence when they died
The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the will is challenged). There must not be any other factors mitigating against exercising it.
In this case, there are two ownership interests held by the Estate. Half of the property was acquired before 20 September 1985 and the remaining half was acquired after 20 September 1985, where the property was the deceased's main residence until they passed away. As such, any capital gain or loss made on both ownership interests would be disregarded if the property was sold within two years of the date of death.
Some of the steps the Trustees needed to complete prior to the sale were delayed due to the unavoidable events disclosed in your private ruling request.
As a result of these delays, the property was not sold within two years but it is expected it will be sold approximately four months from the end of the two year period.
The Commissioner accepts that it is appropriate to grant the short extension that you have requested.