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Edited version of your written advice
Authorisation Number: 1051288901547
Date of advice: 28 September 2017
Ruling
Subject: Capital gains tax - deceased estate – 2 year discretion.
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 settlement?
Answer
Yes.
This ruling applies for the following period(s)
Year ended 30 June 2017.
The scheme commences on
1 July 2016.
Relevant facts
The deceased also known as ‘A’ acquired a dwelling (the dwelling).
The deceased passed away in 2013 (the deceased).
The dwelling was the deceased’s main residence.
The deceased left a will in which they appointed ‘B’ and ‘C’ as trustees and beneficiaries.
The trustees reside overseas and are not fluent in English. Communication was required to be translated and this caused significant delays.
The deceased’s affairs were under an administration order prior to the date of death.
The administration of the deceased estate was subsequently transferred to another organisation (‘D’) in 2013.
The original will was unable to be located. Attempts were made to locate the will with the solicitor who prepared the will and financial institutions. This proved unsuccessful and caused delays.
‘D’ prepared the necessary documents in relation to administering the estate under intestacy.
‘D’ became aware of a surviving child of the deceased. The child was estranged and passed away in 2014. ‘D’ prepared the application for probate after confirming the identity of the child.
A financial institution (‘E’) subsequently located the original will of the deceased around 2016. ‘E’ confirmed that due to the different spelling of the deceased’s name the original will was not located earlier.
‘D’ communicated with the trustees and received authorisation for an application to be made in relation to the original will. This was received on in 2016.
‘D’ was granted probate in 2016.
‘D’ took possession of the dwelling and prepared the dwelling for sale.
The dwelling was sold by auction in 2017.
Settlement took place a short time later in 2017.
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 settlement.
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 due to the complexity of the deceased estate which delayed the completion of the administration of the estate.
The Commissioner accepts that it is appropriate to grant the extension that you have requested.