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Edited version of your written advice
Authorisation Number: 1013004080763
Date of advice: 28 April 2016
Ruling
Subject: Deceased estate
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 period:
Year ending 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
The deceased passed away.
The property was the deceased's main residence at the time of their death.
The property was never used to produce assessable income.
You and your sibling disputed the will for some time.
Probate was granted on dd/mm/yyyy.
You and your sibling continued to have issues over the estate. The matter was finally settled at mediation.
The property was listed for sale the same month and settled within a couple of months.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-195.
Reasons for decision
Subsection 118-195(1) of the ITAA 1997 states that if you are an individual who owns a dwelling in a capacity as trustee of a deceased estate, then you are exempt from tax on any capital gain made on the disposal of the property if:
• The property was acquired by the deceased on or after 20 September 1985 and the property 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; or the property was acquired by the deceased before 20 September 1985; and
• your ownership interest ends within two years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
In your case, the property has not been sold within the two year time limit. Therefore, you will only be able to disregard the capital gain from the sale of the property if the Commissioner grants an extension to the two year time limit.
The Commissioner can exercise his discretion in situations such as where:
• 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 your case, the delay in the disposal of the property was due to disputes over the will causing delays in receiving probate and in finalising the estate. The property was subsequently sold within a few months.
Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit. Accordingly, you will be entitled to disregard the capital gain on the sale of the property.