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Edited version of your written advice
Authorisation Number: 1051407432927
Date of advice: 16 August 2018
Ruling
Subject: Capital gains tax – 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 2018
The scheme commences on
1 July 2017
Relevant facts and circumstances
The Deceased and their spouse purchased the dwelling after 20 September 1985 (the Dwelling).
Sometime later the Deceased’s spouse passed away.
The Deceased was left at the Dwelling overnight after the passing of their spouse.
The next morning the Deceased was found unconscious by the Deceased’s child (Child 1) who rang an ambulance.
A few days after the Deceased’s spouse passed away the Deceased passed away.
The Dwelling was the Deceased’s main residence at their time of 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 appointed Child 1 (You) as an Executor and Trustee of the Deceased’s estate.
A few months after the passing of the Deceased Probate was granted.
You and your spouse run a small business where you manage all the projects.
You went straight back to work after the death of your parents as projects were incomplete. You were unable to function at work to the degree you did before the passing of your parents. As a result of this you fell further behind with your work increasing the pressures and stresses of the circumstance.
Following the sudden loss of your parents, and the stresses with running a small business, you were diagnosed with severe anxiety and depression. The stress associated with these events also contributed to your other medical condition worsening. These facts are supported by a confirming letter from your Doctor.
Approximately two years after the Deceased passed away the Dwelling was listed for sale.
One month later the Dwelling went to auction and was passed in.
The next week the Dwelling went to auction and was sold.
A few weeks later the sale of the Dwelling fell through.
Approximately three months after the Dwelling was listed for sale the Dwelling went to auction and was sold.
Two years and six months after the Deceased passed away 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
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 until DDMMYY.
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 situation as a result of the passing of both parents, in different incidents, in a short period of time, you were diagnoses with anxiety and depression. This associated with the stresses of running a small business prevented you from disposing of the property within the two year period.
The Commissioner accepts that it is appropriate to grant the short extension that you requested.