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Edited version of your written advice
Authorisation Number: 1051411566998
Date of advice: 6 August 2018
Ruling
Subject: 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 2019
The scheme commences on
1 July 2018
Relevant facts
The deceased acquired a dwelling (The dwelling).
The deceased passed away in 2016 (The deceased).
The dwelling was the deceased’s main residence.
The beneficiaries of the deceased were unable to agree on a valuation of the dwelling so that a sale of the dwelling could take place. The initial plan was for one of the beneficiaries to sell their interest to the other beneficiaries.
The beneficiaries engaged legal representatives in 2017 in order to reach an agreement in relation to the sale.
The beneficiaries obtained a number of valuations with a view to a transfer between the beneficiaries. This did not eventuate as the valuations of the dwelling varied.
A decision was ultimately agreed between the beneficiaries that the dwelling would be placed on the market for sale.
The dwelling was placed on the market in 2018.
Settlement occurred 2018.
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 valuation of the dwelling being challenged and as a result legal correspondence was necessary between the beneficiaries. This caused delays which 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.