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Edited version of your written advice
Authorisation Number: 1013019708885
Date of advice: 18 May 2016
Ruling
Subject: CGT - deceased estate - EOT
Question 1
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
No.
This ruling applies for the following period:
Year ended 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
The deceased's main residence was purchased in 198X.
The property was left to you and your siblings in the deceased's will.
You and your siblings were minors at the time of the deceased's passing.
The executor of the estate kept the property as an investment. The deceased's will, did not specify what needed to be done with the property.
The property was transferred into your names when you were all over 21.
The property was sold in 201X.
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 deceased acquired the property after 20 September 1985 however your ownership interest did not end within 2 years of the deceased's death. 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 exercising the discretion the Commissioner will also take into account whether and to what extent the dwelling is used to produce assessable income and for how long the trustee or beneficiary held the ownership interest in the dwelling.
In your case, the executor of the deceased estate chose to keep the property as an investment property, until the beneficiaries were 21. The deceased's will, did not enforce this on the executor. As you were minors at the time, we appreciate that you had no control over this decision by the executor. Unfortunately however, the Commissioner does not have the ability to exercise his discretion in this situation.
Having considered the particular circumstances of this case, the Commissioner is unable to apply his discretion under subsection 118-195(1) of the ITAA 1997 to allow an extension to the two year time limit. Therefore the capital gain made on the disposal of the property will not be able to be disregarded entirely.