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Edited version of your written advice
Authorisation Number: 1051316259345
Date of advice: 18 December 2017
Ruling
Subject: Capital gains tax – deceased estate – Commissioner’s 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?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 201Y.
The scheme commences on
1 July 201X.
Relevant facts and circumstances
T acquired a dwelling after 20 September 1985 (the dwelling).
T passed away over 10 years ago (the deceased).
The dwelling was the deceased’s main residence.
The dwelling has not been used to produce assessable income before and following the deceased’s passing.
The deceased’s will appointed two executors, one of whom had passed away before the deceased.
The sole beneficiary of the deceased’s estate was one of the deceased’s children and the deceased child continued to reside in the deceased’s dwelling.
Within 18 months of the deceased’s passing, the deceased’s children filed an application in the Relevant Court under the Testator Family Maintenance Act.
Due to conflict between the executor and beneficiary, the executor couldn’t obtain a grant of probate, renounced the role some years later and the administration of the estate was referred to the Public Trustee.
There was an ongoing legal challenge for the control of the estate which took a considerably long period of time.
The beneficiary’s solicitor resisted attempts by the Public Trustee to obtain a copy of the deceased’s will.
Letters of Administration were granted approximately four years ago.
After the Letters of Administration was granted, Orders in relation to the family provision claims lodged by the deceased’s children were made by the court.
Proceedings to remove the beneficiary from the deceased’s dwelling commenced with a notice to evict the beneficiary in 201Z and the beneficiary was instructed to remove belongings from the dwelling.
In 201X the dwelling could be listed for sale and settlement of the sale of the dwelling occurred a short time later.
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.
● One of the executors appointed under the deceased’s will predeceased the deceased and the remaining executor was unable to obtain probate and renounced their role some years later.
● The deceased’s children and beneficiary named in the deceased’s will commenced legal action within 18 months of the deceased’s passing under the family maintenance provisions.
● There was ongoing legal action regarding the control of the estate.
● The Public Trustee was engaged to administer the deceased’s estate.
● The Public Trustee was unable to obtain Letters of Administration until they could obtain a copy of the deceased’s will and confirm the validity of the will.
● Letters of Administration were granted some years later.
● The estate could not be administered until the Court delivered judgment in relation to the family provision proceedings.
● Following the legal proceedings, procedures were implemented within six months to evict the existing beneficiary from the deceased’s dwelling.
● The dwelling was listed for sale immediately after it became vacant and was sold within six months of it becoming vacant.
As a result of the circumstances and factors outlined, the Commissioner accepts that it is appropriate to grant the extension that you have requested.