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Edited version of your written advice
Authorisation Number: 1013033904183
Date of advice: 14 June 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?
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 property and it was a main residence for the whole period of ownership.
The deceased moved into a retirement facility in 200X however the property remained the main residence and was not used to produce income.
The deceased passed away in 20XX.
You were the trustee of the deceased's estate.
You were travelling when the deceased passed and flew to Australia to start the administration of the estate.
You had to fly back to where your vessel was kept in order to move it to a safe storage location.
Around five months after the deceased's death, you flew back to Australia again to continue administration and to attend repairs to the property.
You then flew back to your vessel and returned back to Australian.
During the time you were travelling, the property sustained extensive damage and you endeavoured to repair the property as quickly as possible.
The property sold at auction and settled two years and X months after the deceased's 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
Income Tax Assessment Act 1997 subsection 118-195(1)
Reasons for decision
Summary
The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time until dd/mm/yyyy.
Detailed reasoning
The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person's estate sell that dwelling within two years of the date of death.
Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was:
• Acquired by the deceased before 20 September 1985, or
• The deceased's main residence when they died.
The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the will is challenged). There must not be any other factors mitigating against exercising it.
In your case, you were out of the country when the deceased passed and had to fly back to Australia multiple times to attend to the estate. The property also had damage and sustained further damage which was all required to be repaired prior to selling the property. When practicable, you took the necessary steps to sell the property. As a result the settlement occurred X months after the two year period.
The Commissioner accepts that it is appropriate to grant the short extension that you have requested.