Edited version of your written advice

Authorisation Number: 1051214011876

Date of advice: 11 May 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?

Answer

Yes

This ruling applies for the following periods:

Year ending 30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

The deceased acquired a pre CGT dwelling (the dwelling).

The deceased passed away in 1995 (the deceased).

The dwelling was the deceased's main residence.

The deceased died intestate.

Immediately following the deceased's death, X and Y commenced caring for the dwelling and paying bills connected with the dwelling and small maintenance costs.

This caretaking arrangement continued until 2015.

A parent of Y was related to the deceased.

Y held an expectation of inheriting the deceased's dwelling.

X and Y obtained legal advice in late 2015 of their entitlement to the deceased's estate.

X and Y's legal personal representatives advised them in late 2015 that a beneficiary of the deceased's estate was identified as the estate of the late Z.

The late Z lived with a relative prior to death.

X and Y's legal personal representatives wrote to Z's relative and requested details of the executor or administrator of the late Z's estate.

The spouse of the relative of Z was executor of Z's estate.

The executor of Z's estate had standing to apply for letters of administration for the deceased's estate.

Before the executor could make an application for letters of administration, an application for the grant of probate of Z's estate had to be made in 2016.

The court had requested further information in relation to a bank account held by the late Z, which delayed the grant of probate of Z's estate.

Probate of Z's estate was granted in 2016.

Letters of Administration for the deceased's estate were granted by the Supreme Court in late 2016, with distribution of the estate being granted to executor of the estate of Z.

Settlement of the dwelling occurred on late 2016. 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 31 July 2017.

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.