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Edited version of your written advice
Authorisation Number: 1012893915345
Date of advice: 13 October 2015
Subject: Capital gains tax - deceased estate - Commissioner's discretion to extend the two year period - main residence exemption
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
16 months?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2016.
The scheme commenced on
1 July 2012.
Relevant facts and circumstances
The deceased bought the residential property located at some time after 20 September 1985.
The deceased passed away during the 20XX income year.
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 40 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
• The deceased's parent passed away before they could sell the property as administrator of the deceased's estate.
• The death of the deceased's parent and legal proceedings lead to delays in the winding up of the deceased estate.
Assumptions
The property will be sold as expected within 40 months of 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 16 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, the property was acquired after 20 September 1985 and was the deceased's main residence until they passed away. As such, any capital gain or loss made would be disregarded if the property was sold within two years of the date of death.
The sale of the property has been 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 with settlement occurring within 16 months of the end of the two year period.
The Commissioner accepts that it is appropriate to grant the extension that you have requested.