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Edited version of your written advice
Authorisation Number: 1012977566955
Date of advice: 26 February 2016
Ruling
Subject: Capital gains tax
Question and answer
Will the Commissioner exercise his discretion to extend the 2 year period under section 118-195 of the Income Tax Assessment Act 1997?
No.
This ruling applies for the following periods:
Year ended 30 June 2014
The scheme commenced on:
1 July 2013
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 died in the 20XX income year.
The property was purchased by the deceased pre 1985.
The property was used as their main residence until their death.
The property was not rented out prior to their death or after their death.
The property was sold in the 20XX income year.
The delay in the property being sold is as follows:
• Funeral
• Will was not signed so not valid
• Spoke with solicitors about options
• You returned to your home state for work after staying in the property from your parents death
• Made enquiries at council on what to do
• Made a number of phone calls
• Found out what options were, do it yourself, get a solicitor or Public trustee
• Got quotes for all three options on doing it yourself, getting a solicitor or Public trustee
• You attempted doing it yourself and found it too complicated
• Made a number of trips from your home state to the state the house was in
• Used a solicitor but and was referred to a solicitor
• Decided to use Public trustee
• Probate was granted eight months after Public trustee was appointed
• Transfer took a month after probate was granted
• House placed on the market
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 118-195(1).
Reasons for decision
A capital gain or capital loss is made as a result of a capital gains tax (CGT) event happening to a CGT asset (section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997)). The most common CGT event is CGT event A1 the disposal of a CGT asset.
Subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that if 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, then you are exempt from tax on any capital gain made on the disposal of the property acquired by the deceased after 20 September 1985 if:
• the property was the deceased's main residence just prior to their death
• it was not being used to produce assessable income at this time, and
• Your ownership interest ends within 2 years of the deceased's death.
You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed).
The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion to extend the time period in which you can dispose of the property:
• 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
In determining whether or not to grant an extension the Commissioner is expected to consider whether, and to what extent, the dwelling is used to produce assessable income and how long the trustee or beneficiary held it.
In your case there was a delay from when your parent died to the sale of their property.
This delay predominantly is due to your indecision on who to appoint to administer the estate.
Once you had made the decision to appoint the Public trustee probate was granted and the property was transfer to you and it was then able to be sold by you.
For approximately XX months after your parent's death you lived in the property while working.
The Commissioner will not exercise his discretion to extend the 2 year time limit to the settlement date, as the circumstances relating to the delay in the sale of the property, was not beyond your control.
Accordingly, the sale of the property will not be exempt from CGT pursuant to section 118-115 of the ITAA 1997.