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Edited version of your written advice
Authorisation Number: 1013025168675
Date of advice: 26 May 2016
Ruling
Subject: Capital gains tax - deceased estate - Commissioner's discretion - two year period
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 until dd/mm/yyyy?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2016.
The scheme commences on
1 July 2015.
Relevant facts and circumstances
The deceased acquired the residential property prior to 20 September 1985 and was the deceased's main residence for the whole period of ownership.
The deceased passed away, intestate.
You were not notified of the deceased death until a number of months after death.
The property was held by an estate administrator from the date of death until it was transferred you about a year after the deceased's death.
Once transferred to your name, the property was then put on the market.
The property sold at auction and settled more than two years after death.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 subsection 118-130(3)
Income Tax Assessment Act 1997 section 118-195
Reasons for decision
Commissioner's discretion under Section 118-195 of the ITAA 1997
Subsection 118-195(1) of the ITAA 1997 provides a capital gains tax (CGT) exemption to a beneficiary or trustee of a deceased estate where a CGT event happens to a dwelling (or an ownership interest in a dwelling) acquired from a deceased estate.
An exemption is provided where the beneficiary or trustee's ownership interest in the dwelling ends within two years of the deceased's death and just before the deceased's death (for pre-CGT dwellings) the dwelling was their main residence.
The Commissioner has discretion to extend the two year time period in subsection 118-195(1) of the ITAA 1997 where the trustee or beneficiary of a deceased estate's ownership interest ends after two years from the deceased's death. This discretion may be exercised in situations such as where:
1. the ownership of a dwelling or a will is challenged;
2. the complexity of a deceased estate delays the completion of administration of the estate;
3. 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
4. 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, you were not notified of the deceased death for some time after death, and once they property was transferred to you, you took the necessary steps to sell the property. As a result the settlement occurred after the two year period.
Having considered the relevant facts, 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 until settlement of the property.