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Edited version of your written advice
Authorisation Number: 1051176948407
Date of advice: 22 December 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 a specific date in 20YY?
Answer
Yes.
This ruling applies for the following period(s)
Year ended 30 June 20XX, 20YY and 20ZZ.
The scheme commences on
1 July 20WW
Relevant facts and circumstances
The deceased passed away in 20VV without a will. This caused a delay in probate being granted. Probate was granted in 20VV.
The property located at ABC was the deceased's main residence and was not used to produce assessable income.
The children of the deceased are the potential beneficiaries of the deceased's estate: however, they have been estranged from one another, which further complicated the administration of the estate.
A contractor was engaged to undertake minor repairs to the residence prior to prepare the property for listing but the contractor was not qualified to complete the repairs and caused further damage.
The beneficiaries of the estate then had to borrow funds to repair the house and make it ready for sale. The damage sustained to the house and the subsequent repairs required to enable it to be listed caused further delays.
The property was sold at auction in 20YY and settlement of the property occurred in 20YY.
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 a specific date in 20YY.
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 in administration of the deceased estate which delayed the completion.
The Commissioner accepts that it is appropriate to grant the short extension that you have requested.