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Edited version of your written advice
Authorisation Number: 1051351791466
Date of advice: 20 March 2018
Ruling
Subject: The Commissioner’s discretion to extend the two year time limit to dispose of a dwelling
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?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2018.
The scheme commences on
December 2015.
Relevant facts and circumstances
The deceased passed away more than two years ago.
The deceased owned a property with their spouse (the dwelling).
Several years ago, the deceased became the sole owner of the dwelling upon the passing of their spouse.
Following the deceased’s passing, the estate was challenged and proceedings were delayed by another party not responding to your legal representative.
Following mediation, you paid that party a settlement amount, acquired the property and moved to market the dwelling for sale.
The dwelling was sold with settlement occurring a few months later than the two year period.
The dwelling has not been used to generate income.
The dwelling was the main residence of the deceased.
The dwelling is located on land that is less than two hectares.
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.
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.
In your case, the delay in disposing of the dwelling was due to the estate of the deceased being challenged. This delay prevented you from disposing of the dwelling within the two year time limit.
The Commissioner accepts that it is appropriate to grant the short extension that you have requested.