Edited version of your written advice

Authorisation Number: 1051379354116

Date of advice: 5 June 2018

Ruling

Subject: CGT – deceased estate – Commissioner’s discretion to extend the two year period

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 201x.

The scheme commences on

1 July 201x.

Relevant facts and circumstances

The Deceased purchased the dwelling prior to 20 September 1985.

The Deceased passed away after a number of years.

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.

A child of the deceased was named executor of the deceased’s estate.

A short time after the deceased passed away Probate was granted.

Approximately 18 months after the deceased passed away the dwelling was first advertised for sale on the internet.

The Dwelling was also advertised for sale via a 4-week Expression of Interest campaign organized by commercial real estate agent.

The Dwelling was also advertised by print media in the City AA Courier Mail, City AA News, and YY News.

There were six offers made in total on the Dwelling. Four offers were from commercial property developers, and two were from private individuals interested in living in and renovating the existing home.

Offers made ranged from $XXX,000 (private individuals) to $X,XXX,000. Settlement periods ranged from 30 days to 12 months. The offers made by the developers came with many conditions attached.

Two months after the dwelling was listed for sale you accepted the offer made by the purchaser.

The initial sale price was $X,XXX,000 with 30 days due diligence and a nine month settlement date period.

Six months after the sale of the Dwelling the purchaser requested a five month extension of settlement. The purchaser also increased the price by another $XX,000 because of this extension of time.

Approximately two years and ten months after the dwelling was sold settlement occurred on the Dwelling.

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 delay in disposing of the dwelling was caused by unexpected delays in the settlement of the dwelling for reasons outside the beneficiary or trustee’s control and these delays 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.