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Edited version of your written advice
Authorisation Number: 1051189188464
Date of advice: 13 February 2017
Ruling
Subject: Capital gains tax - deceased estate -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?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2017.
The scheme commences on
1 July 2016.
Relevant facts and circumstances
Your parent acquired a dwelling.
Your parent passed away in 20AA (the deceased).
The dwelling was the deceased's main residence.
The deceased's Will provided an equal interest in the dwelling to the deceased's child, and the deceased's grandchild.
The Will was challenged by two family members, with legal actions commencing 20BB and 20CC.
Legal actions with one family member were mediated and settled in 20CC.
The other family member has not pursued the legal action any further.
The settlement of the dwelling occurred in 20DD.
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 Will of the deceased being challenged. This delay 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.