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Edited version of your written advice
Authorisation Number: 1012973974837
Date of advice: 23 February 2016
Ruling
Subject: Dwelling from a Deceased Estate
Question and Answer
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 to when your ownership interest in the property ceased?
Yes
This ruling applies for the following periods
Financial year ended 30 June 20XX
Financial year ended 30 June 20XX
The scheme commences on
1 July 20XX
Relevant facts and circumstances
The property was purchased before 20 September 1985
The total land area of the property is greater than 2 hectares
The property was purchased as the family home of the Deceased and the deceased spouse.
The property was purchased as a joint tenancy.
The property was the main residence for the married couple, and remained the main residence of the surviving spouse up to their date of death.
The deceased spouse passed away about X years ago.
A survivorship application transferred the spouse's share of the property to the Deceased.
The Deceased passed away.
The property formed part of the Deceased's Estate.
Probate for the Estate of the Deceased occurred shortly after their death.
No occupancy rights in the property were granted to any particular person or beneficiaries under the will.
The property was not used by the Estate for any income producing purposes, as the intention was to sell the Property as soon as practicable.
The property was sold more than 2 years after the Deceased's date of death.
The ownership of the dwelling was not challenged.
The complexity of the sale of the land contributed to delays in its completion.
Relevant legislative provisions
Section 118-195 of the Income Tax Assessment Act 1997
Reasons for decision
As per subsection 118-195(1) of the Income Tax Assessment Act 1997 (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 your case, the Deceased initial interest in the dwelling was acquired before 20 September 1985, it remained the main residence of the Deceased until their death. The Deceased required the remaining interest in the dwelling on the death of their spouse. The dwelling was never used by the Deceased for the purpose of producing assessable income. The Estate of the Deceased did not end their ownership interest in the dwelling within 2 years of the deceased's death.
You will only be able to disregard the capital gain from the sale of the dwelling if the Commissioner extends the time period in which you can choose to dispose of the dwelling.
The Commissioner concludes from the facts that the cause of the delay was the complexity of the property and the steps required to bring it to sale.
The Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit to the date of the property's disposal. Accordingly, you can disregard any capital gain or loss that arises as a result of the disposal of the dwelling and the adjacent X hectares.