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Edited version of your written advice
Authorisation Number: 1013133993875
Date of advice: 30 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 30 June 20ZZ?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 20ZZ.
The scheme commences on
1 July 20YY.
Relevant facts and circumstances
The deceased person died in the 20WW-XX financial year. Just prior to their death they had entered into discussions to make amendments to their will.
The beneficiaries subsequently disputed the will. As two of the beneficiaries resided in an overseas country, they had to obtain suitable legal representation.
Furthermore, the executor's spouse became ill, and the executor was unable to concentrate fully on the administration of the estate.
The main residence of the deceased was placed on the market in the 20XX-YY financial year. The property was eventually sold, and settlement took place in the 20YY-ZZ financial year, more than 2 years after the deceased's date of 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 30 June 20ZZ.
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.
The delay in disposing of the dwelling was due to the complexity of the deceased estate which delayed the completion of the administration of the estate.
The Commissioner accepts that it is appropriate to grant the short extension that you have requested.