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Edited version of your written advice
Authorisation Number: 1051356688793
Date of advice: 27 April 2018
Ruling
Subject: The Commissioner's discretion to extend the two year time limit to dispose of an inherited 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 20XX.
The scheme commences on
1 July 20XX.
Relevant facts and circumstances
The Deceased purchased the Dwelling prior to 20 September 1985 (the Dwelling).
The Deceased passed away in mth/year.
The Dwelling was the Deceased’s main residence at the time of their death.
The Dwelling was not used for income producing activities and no income has been received from the Dwelling after the passing of the Deceased.
The will stated the Dwelling was left to five of the Deceased’s six children (the beneficiaries) as follows:
● AB% of the Dwelling to each of four siblings (you are one of these beneficiaries); and
Probate was granted three months after the Deceased passed away.
Just after probate was granted the five beneficiaries had a discussion about what to do with the Dwelling. At this stage two of the beneficiaries and the sixth and youngest sibling were living in the Dwelling. The two beneficiaries had lived in the Dwelling for their entire life.
The five beneficiaries also own two other properties, Property One and Property Two.
Approximately six months after the death of the Deceased the Dwelling was transferred to the executors of the estate.
Approximately 12 months after the death of the Deceased the five beneficiaries had a meeting to discuss what to do with the Dwelling. One of the two of the beneficiaries living in the Dwelling was uncertain on whether to sell the Dwelling or not.
A few months later the five beneficiaries had another meeting to discuss what to do with the Dwelling. It was decided that the two beneficiaries residing in the Dwelling would be able to buy the Dwelling if certain shares in Property One and Property Two were bought by the other siblings.
Just after the decision was made to sell the Dwelling to the two beneficiary’s valuations were conducted on the Dwelling, Property One and Property Two.
The next month a solicitor accepted a request from the beneficiaries to act as the beneficiary’s solicitor in this situation.
Approximately one and a half years after the Deceased passed away
● you received notice from the solicitor that the Dwelling will be transferred to the beneficiaries in accordance with the will;
● the Dwelling was transferred to the beneficiaries;
● the solicitor supplied you and the other beneficiaries with the Deed; and
● you received correspondence from the solicitor stating that all beneficiaries have signed the Deed and all documents have been sent for processing.
Approximately one month after all documents have been sent for processing, the processor requested a copy of the beneficiary’s passports.
Approximately one month later the solicitor advised you they received correspondence from the processor that the matter will be finalised shortly.
Approximately two years after the Deceased passed away a case officer from the processor actioning your case emailed the solicitor stating they had been on holiday for the past three weeks and would finalise the matter shortly.
Within the next few weeks
● the solicitor emails the processor with he’s concerns over the delays in finalising the matter;
● the solicitor received a Notice of Assessment from the processor with the amount of duty payable;
● you deposited your share of the duty into the trust account the solicitor had set up for this situation. Over the next few days all duty was deposited into the trust account; and
● the Deed was stamped by the processor.
Approximately two years and two months after the deceased passed away the Dwelling was transferred to the two siblings.
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 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.