| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1051221138940
Date of advice: 4 May 2017
Ruling
Subject: Capital gains tax - extend two year time period
Question 1
Will the Commissioner exercise discretion under section 118-195 of the Income Tax Assessment Act 1997 and extend the two year time period until late 20YY?
Answer
Yes
This ruling applies for the following periods:
Year ending 30 June 20YY
Year ending 30 June 20ZZ
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
In 20WW your parent (the deceased) passed away.
The deceased estate of your parent has been completely finalised and you and your siblings inherited the main residence (the property).
The Local Government agencies have implemented strategies to upgrade facilities for public use that in the area where the property is located and these is still ongoing.
The public upgrades affected the sale of this property.
The property has since been sold and a contract signed. The purchaser has requested an extended settlement period up until late 20YY.
Reasons for decision
Capital gains tax (CGT) event A1 happens when you dispose of a CGT asset, as established in Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997).
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 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
Application to your circumstances
In your case, the property was purchased by the deceased and was their main residence until they passed away. The property was not sold within 2 years of the deceased's date of death. The delay was caused by circumstances outside your control due to Government agencies implementing upgrades of public use.
The property has an extended settlement date in place.
Having considered your personal circumstances, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time until late 20YY.