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Edited version of your written advice
Authorisation Number: 1051194071870
Date of Advice: 27 February 2017
Ruling
Subject: CGT Extension
Question 1
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
A person passed away
The property was owned solely and was their primary place of residence
Probate of the will was granted to an organisation.
An organisation became the registered proprietor of the property as the legal personal representative of the deceased's estate
A child resided at the property until their date of death.
The child used the property as their main residence
An organisation was appointed administrators for the child until their date of death. Under the administration order the child was unable to make any financial and legal decisions.
The will did not provide anyone with the right to reside at the property. It provided the child with an entitlement to the income from investments during their life to provide for maintenance and benefit advancement in life and general well being
An organisation was given a discretionary power of sale over the estate. A determination was made to retain the property for the benefit of the child as their place of residence.
An organisation moved to finalise the estate administration after the death of the child
An Individual befriended and resided with the child from an unknown date, under an unauthorised tenancy agreement.
An organisation served a vacation notice requesting the property be vacated.
An organisation were contacted and advised a lease agreement was active.
An individual refused to vacate the property
An organisation went to a Court and successfully obtained a Vacate Order
An individual did not comply with the order and was evicted from the property
An organisation took immediate possession of the property once the eviction orders were actioned and commenced the process to put the property on the market
Property was prepared for sale by public auction
Settlement of the property was completed
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
Subsection 118-195(1) of the 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).
In this case, the property was purchased by the deceased before 20 September 1985 and was their main residence until they passed away. The property was not sold within 2 years of the deceased's date of death.
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 his 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
Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time.