Edited version of your written advice

Authorisation Number: 1013087870956

Date of advice: 9 September 2016

Ruling

Subject: Deceased estate capital gains

Question

Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 ('ITAA 1997') in relation to the dwelling on the property and allow an extension of time until 30 June 2016?

Answer

No

This ruling applies for the following period(s)

Year ending 30 June 20ZZ

The scheme commences on

1 July 20YY

Relevant facts and circumstances

The deceased passed away 20XX

The deceased's main residence ('the property') formed part of the deceased's estate.

Significant repairs were undertaken on the property.

The property was sold 20YY, over 3 years after the deceased's date of death.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision

Subsection 118-195(1) of the ITAA 1997 states that if you own a dwelling in your capacity as trustee of a deceased estate (or it passed to you as a beneficiary of an 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 before 20 September 1985, or

• the property was acquired by the deceased on or after 20 September 1985 and the dwelling 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, and

• your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).

You will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the 2 year time period.

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 this case, there has been no challenge to the will, the estate was not complex, there were no unforseen or serious personal circumstances that prevented the sale, and the delay in selling the property is not due to circumstances beyond the beneficiary or trustee's control.

Examples of where the Commissioner has not exercised the discretion:

• property not placed on the market for sale until after 2 years has passed (and no valid reason given for delay)

• improvements/renovations carried out to increase market value prior to sale

• subdivision undertaken by the executors which is not contemplated or required by the deceased's will

• a beneficiary has been allowed to live in the property by the executor but this is not expressly provided for in the will

We appreciate your situation in conducting repair work to the property before listing it for sale however the situation is of a different nature to which the Commissioner can exercise his discretion.

Having considered the relevant circumstances, the Commissioner will not exercise his discretion and extend the 2 year time limit.