Edited version of your written advice

Authorisation Number: 1051414542254

Date of advice: 14 August 2018

Ruling

Subject: The 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 periods

Year ended 30 June 20xx

Year ended 30 June 20xx.

The scheme commences on

1 July 20xx.

Relevant facts and circumstances

The deceased acquired a dwelling sometime after 1985.

The deceased passed away a number of years later.

The dwelling was the deceased’s main residence.

You found the deceased, your parent, after they had died in their home.

Due to the emotional distress you experienced you did not return to the dwelling for 18 months.

Probate was granted.

You are the sole executor and beneficiary of the estate.

You were not aware that you needed to dispose of the dwelling within two years from the deceased’s date of death in order to be exempt from capital gains tax (CGT).

In early 2018 you asked the Commissioner to exercise his discretion to extend the two year exemption period to dispose of the dwelling. You were advised that you did not need to apply for the discretion until the dwelling had been sold.

Once you were advised of the timeframe, you completed some renovations to get the dwelling in a state fit for sale.

The dwelling was sold and settlement occurred two years and four months after the deceased’s death.

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.

We have taken the facts of your situation into consideration when determining whether the Commissioner’s discretion would be exercised to extend the two year period and allow you to disregard any capital gain or capital loss made on the disposal of the dwelling under subsection 118-195(1) of the ITAA 1997.

We accept that the reason for the delay in the disposal of the deceased’s dwelling was due above mentioned issues arising during the two year period after the deceased had passed away.

Using the guidelines provided above and having considered the relevant facts of your situation, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit.

The Commissioner accepts that it is appropriate to grant the short extension that you have requested.