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Edited version of your written advice
Authorisation Number: 1051233056699
Date of advice: 2 June 2017
Ruling
Subject: Capital gains tax - extending the 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 settlement date?
Answer
Yes
This ruling applies for the following periods:
Year ending 30 June 201F
Year ending 30 June 201E
Year ending 30 June 201D
The scheme commences on:
1 July 201C
Relevant facts and circumstances
The deceased passed away in 201B.
The deceased owned a dwelling purchased after 1985 and this was their main residence until his/her date of death.
Upon purchase a caveat is placed over the property by an external party.
From 201A to 201D the property was broken into numerous times causing serious vandalism, requiring extensive repairs to be undertaken.
The deceased's estate is appointed to two of their children as the executors.
Probate was granted in 201C. This delay was due to the caveat held by the external party.
Once the property was restored to a habitable condition, it was placed on the market for sale in 201C.
Property was sold and settled in 201D.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 104-10
Income Tax Assessment Act 1997 section 118-195
Income Tax Assessment Act 1997 subsection 118-195(1)
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 complexity of a deceased estate delays the completion of administration of the estate.
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 due to the complexity surrounding the estate in completing the administration duties.
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 settlement date.