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Edited version of your written advice
Authorisation Number: 1051339823152
Date of advice: 20 February 2018
Ruling
Subject: CGT –deceased estate- 2 year period -extension of time
Question
Would the Commissioner exercise the discretion in section 118-195 of the Income Tax Assessment Act 1997 in your particular circumstances?
Answer
No
This ruling applies for the following period
Year ending 30 June 2018
The scheme commenced on
01 July 2016
Relevant facts and circumstances
The deceased purchased the property as tenants in common with their spouse in 19XX.
On the death of their spouse they became sole proprietor of this property until they died.
The property was the deceased’s main resident and was not used to produce assessable income.
There was an investigation into the deceased’s death and accordingly, the death certificate was not available until sometime after their death. Probate was granted.
The property required some general maintenance and repairs prior to sale.
People occupied the dwelling for a period of time prior to sale.
No rent was paid. They were not beneficiaries of the deceased estate who had a right to occupy the dwelling under the deceased’s will.
The property was listed for sale and subsequently settled.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-195
Detailed reasoning
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 have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed).
The deceased purchased the property with their spouse and on the death of their spouse they became sole proprietor of this property until they died.
The property was the main residence of the deceased until they passed away.
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 this case, there has been no challenge to the will, the estate was not complex, there were no unforeseen or serious personal circumstances that prevented the sale, and the delay in selling the property is not due to circumstances beyond the beneficiary or trustee’s control.
While we appreciate your circumstances regarding the delay in the granting of probate because of a coronial enquiry, it was eventually granted within months of the date of death.
The delay for family members to consider purchasing the property is not a circumstance which is beyond the control of the beneficiary or trustee in preventing the property from being placed on the market. The property was to a habitable standard for occupancy as evidenced by the neighbour’s child and their partner occupying the property for some months.
The circumstances are of a different nature to the situations in which the Commissioner can exercise his discretion. Having considered the relevant circumstances, the Commissioner will not exercise his discretion and extend the two year time limit.