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Edited version of your written advice
Authorisation Number: 1051355537991
Date of advice: 3 April 2018
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?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 20XX
The scheme commenced on
1 July 20XX
Relevant facts
The deceased acquired a dwelling (the dwelling)
The deceased passed away in 20XX (The deceased)
The dwelling was the deceased’s main residence.
The deceased was permanently hospitalised in 20XX and the dwelling remained vacant.
You applied for probate and a grant of probate issued in 20XX.
You and the other beneficiaries determined that you would transfer ownership of the dwelling as tenants in common.
The dwelling required significant repairs due to the period that it was unoccupied.
The dwelling was placed on the market and a contract for sale exchanged in 20XX.
Settlement occurred a short time later in 20XX.
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.
The Commissioner accepts that it is appropriate to grant the short extension that you have requested.