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Edited version of your written advice
Authorisation Number: 1051201587505
Date of advice: 22 March 2017
Ruling
Subject: Request for the Commissioner to extend the 2 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 until the requested date?
Answer
Yes
This ruling applies for the following periods:
Year ending 30 June 20ZZ
The scheme commences on:
1 July 20YY
Relevant facts and circumstances
The deceased acquired a pre-1985 dwelling (the dwelling).
The deceased passed away in mid 20XX.
The deceased's grandchild resided in the deceased's dwelling from 20WW until 20XX. The deceased approved the grandchild living in the dwelling whilst residing in an aged care facility during this time.
Following the deceased's death, the executors allowed the deceased's grandchild to continue to live in the deceased's dwelling until 20ZZ.
No income has been derived through the rental of the deceased's dwelling. The grandchild resided in the dwelling without paying any rent, but in return was responsible for the general upkeep and security of the dwelling and tended to the garden.
The deceased's will made their adult children executors of the estate. One of the executors predeceased the deceased and another co-executor was appointed.
The executors experienced difficulties in administering the estate, as some family members were considering acquiring the dwelling. However, when this wasn't possible, a real estate agent was appointed to sell the dwelling.
Household possessions and minor household repairs were required to prepare the house for sale.
Marketing of the dwelling commenced in early 20ZZ and the dwelling was sold in 20ZZ.
Settlement of the property will occur two years and two months after the deceased's date of death.
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 the requested date.
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 delay in disposing of the dwelling was caused by unexpected delays in the settlement of the dwelling for reasons outside the beneficiary or trustee's control and 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.