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Edited version of your written advice
Authorisation Number: 1051183353527
Date of advice: 24 January 2017
Ruling
Subject: Capital gains tax
Question 1
Will the Commissioner exercise discretion under Section 118-195 of the Income Tax Assessment Act 1997 and allow an extension of time to the two year period until ddmmyy?
Answer
Yes.
This ruling applies for the following periods:
Year ending 30 June 2016
The scheme commences on:
1 July 2015
Relevant facts and circumstances
The deceased died in 201X.
The deceased purchased the property pre-CGT.
The property was the deceased's main residence for the entire ownership period.
The property has not been used to produce assessable income.
In 201Y a contract for sale was made on the property. Due to legal disputes that were unable to be settled, the contract fell through. Another contract for sale was signed in 201Z and this contract unexpectedly fell through.
The property sold and settled in ddmmyy.
Relevant legislative provisions
Reasons for decision
Subsection 118-195(1) of the Income Tax Assessment Act 1997 (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 have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed).
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 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
Application to your circumstances
In this case, the property was originally sold within the two year time period, unfortunately the contract fell through. This situation occurred again with another buyer. The delay in the sale of the property was caused by contracts unexpectedly falling through.
Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit until ddmmyy.
As a result of extending the two year time limit, you will satisfy all of the conditions contained in section 118-195 of the ITAA 1997. You can disregard any capital gain or loss that arises as a result of the disposal of the property.