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Edited version of your written advice
Authorisation Number: 1051188072889
Date of advice: 7 February 2017
Ruling
Subject: Capital gains tax – deceased estate – Commissioner’s discretion 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 settlement?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2017.
The scheme commences on
1 July 2016.
Relevant facts
The deceased acquired a dwelling. (The dwelling)
The deceased passed away in 20XX. (The deceased)
The dwelling was the deceased’s main residence.
The deceased named their children as trustees and beneficiaries.
The property consisted of a multi storey main residence and a separate granny flat. The land size was small than similar properties.
The dwelling was on the market for 12 months and listed with a number of agents.
The most recent agent advised that the dwelling had limited appeal due to its unique features and as a result took longer to sell.
The dwelling was not used to produce assessable income.
An offer was accepted in 20YY.
Settlement occurred after a period of time 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 settlement.
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 Commissioner accepts that it is appropriate to grant the short extension that you have requested.