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Edited version of your written advice
Authorisation Number: 1013000049691
Date of advice: 26 April 2016
Ruling
Subject: CGT - main residence - inherited property - extension.
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?
Answer
Yes.
This ruling applies for the following periods
Year ended 30 June 2015
The scheme commences on
1 July 2014
Relevant facts and circumstances
Person X inherited a share of a residential property after 19 September 1985. The remaining shares of the property were inherited by relatives.
Person X subsequently purchased the remaining shares in the property from the relatives.
Person X passed away in the 20XX-XX financial year.
Person X's will, bequeathed the property equally to between their relatives.
The will also allowed for a life tenancy for Person Y.
Person Y passed away in the relevant financial year.
Person X and Person Y resided in the property all their lives.
During the subsequent financial year the property was put on the market for sale.
A sale contract was signed the following month and settled a few months later.
The property has not been used to produce assessable income.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-195
Income Tax Assessment Act 1997 Subsection 118-195(1)
Reasons for decision
Subsection 118-195(1) of the ITAA 1997 allows a beneficiary of a deceased estate to disregard a capital gain or loss from a dwelling if:
• the property was acquired by the deceased before 20 September 1985, or
• the property was acquired by the deceased 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, and
• your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion:
• 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 (e.g. 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 reasons outside the beneficiary or trustee's control.
In this case, Person X passed away more than two years prior to the date the property was sold. Person X's will, provided Person Y with a life interest in the property until they passed away. It was not within your control to dispose of the dwelling within a two year period after Person's X death due to this arrangement. However, the dwelling was disposed of in a timely manner once it was in your control to do so.
Having considered the particular circumstances of this case, the Commissioner will apply the discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit to the date the contract settled.