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Edited version of your written advice
Authorisation Number: 1051184537405
Date of advice: 27 January 2017
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 the requested date?
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 died in mid-20WW.
The deceased owned a property which was their main residence.
The deceased was single and had no relatives in Australia.
Initially, the deceased's will could not be found and an application for the grant of probate was lodged using a copy.
The deceased's will was subsequently found and an updated application for the grant of probate was lodged using the original will.
Probate was granted in 20YY and the property was transferred to the executor.
The executor was dealing serious personal circumstances at the time.
The executor sought to sell the property privately, however, was unsuccessful.
The property was then placed with an agent and sold at auction in late 20YY, with settlement to occur in early 20ZZ.
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.
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 complexity of the deceased estate which delayed the completion of the administration of the estate. There were delays in locating the deceased's will and obtaining probate. These delays 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.