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Edited version of your written advice
Authorisation Number: 1013121277884
Date of advice: 8 November 2016
Ruling
Subject: Capital gains tax - deceased estate - Commissioner's discretion to extend the two year period - main residence exemption
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 YY?
Answer
Yes
This ruling applies for the following period
Year ended 30 June 201X
The scheme commences on
1 July 201X
Relevant facts and circumstances
The deceased acquired their principle place of residence prior to 20 September 1985.
The deceased resided at this address until their death
Probate was subsequently granted to the executor of the Estate of the deceased.
Under the terms of the Will the property was to be given to one beneficiary and the rest of the Estate equally between the other beneficiaries.
A beneficiary disputed the Will and lodged an objection in the Supreme Court to challenge that they were entitled to X0% share of the relevant property and more or less share of the other properties in the Estate.
After several Court hearings and an attempted mediation the Judge finally adjourned the case. Settlement was finally reached in early 201X.
After protracted negotiations a contract of sale was entered into between the Executor and Council with settlement occurring.
At no time from the date of death to the settlement of sale was the property rented out.
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 YY.
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. This delay prevented you from disposing of the dwelling within the two year time limit.
The Commissioner accepts that it is appropriate to grant the short extension that you have requested.