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Edited version of your written advice
Authorisation Number: 1013120195645
Date of advice: 4 November 2016
Ruling
Subject: Capital gains tax - deceased estate - Commissioner's discretion to extend the 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 settlement in 2016?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 20YY.
The scheme commences on
1 July 20XX.
Relevant facts and circumstances
The deceased acquired a dwelling prior to 20 September 1985 (the dwelling)
The deceased passed away a number of years ago (the deceased)
The dwelling was the deceased's main residence.
The dwelling was occupied by the deceased's ex-spouse ('A') prior to the deceased's death.
The deceased's will did not provide an interest in the dwelling or a right to the dwelling to 'A'.
The will was challenged by 'A' and you received advice from your legal representative to settle the dispute by agreeing to permit 'A' to reside in the dwelling until they decide to permanently vacate.
'A' occupied the dwelling until recently and has permanently vacated the dwelling.
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 December 20XX.
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, the delay in disposing of the dwelling was due to the will of the deceased being challenged. The beneficiaries settled the dispute by entering into a deed which provided 'A' with a right to reside at the dwelling until they permanently vacated. This prevented you from being able to dispose of the dwelling within the two year time limit.
The Commissioner accepts that it is appropriate to grant the extension that you have requested.