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Edited version of your written advice
Authorisation Number: 1013061302297
Date of advice: 27 July 2016
Ruling
Subject: Capital gains tax
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
Yes.
This ruling applies for the following periods:
Year ended 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
The deceased bought the residential property sometime after 20 September 1985.
The deceased passed away during the 20XX income year.
The property was not sold within two years of the deceased's death but it is expected it will be sold with settlement occurring in 20XX.
The house on the property was the deceased's main residence until they passed away.
The house was not rented out during the deceased's ownership period.
The delay in selling the property was due to the following reasons:
• The deceased passed away unexpectedly
• The deceased's relative passed away before they could sell the property as administrator of the deceased's estate.
• The death of the deceased's relative and legal proceedings lead to delays in the winding up of the deceased estate.
You had a further delay to settlement due to a change in lawyers at the firm you are dealing with. This change in lawyers has put a considerable delay on the amount of time taken to produce documents requested by a Government Department.
The Government Department has also contributed to the delay by requesting further details that you have to obtain from your lawyers. Despite follow up attempts the Government Department was slow to advise you of this.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 104-10,
Income Tax Assessment Act 1997 section 118-195
Income Tax Assessment Act 1997 subsection 118-195(1)
Reasons for decision
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 this case, the property was acquired after 20 September 1985 and was the deceased's main residence until they passed away. As such, any capital gain or loss made would be disregarded if the property was sold within two years of the date of death.
The sale of the property has been delayed due to the unavoidable events disclosed in your private ruling request.
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.
As a result of extending the two year time limit, you will satisfy all of the conditions contained in section 118-195 of the ITAA 1997. Accordingly, you can disregard any capital gain or loss that arises as a result of the disposal of the property.