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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1051414784283

Date of advice: 13 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 period

Year ended 30 June 2019

The scheme commences on

1 July 2018

Relevant facts

The deceased acquired a dwelling (The dwelling).

The passed away in 2014 (The deceased).

The dwelling was the deceased’s main residence.

The deceased left an unsigned Will. This Will appointed (‘A’) as the executor.

The unsigned Will was not admitted into probate and the deceased estate passed on intestacy.

‘A’ engaged legal representatives who were required to identify the family members of the deceased. This task was difficult as the family members were located in a number of overseas countries. Some of the correspondence required translation.

The relevant Court issued letters of administration in 2017 with ‘A’ as administrator.

The dwelling was prepared for sale and a contract was entered into in 2018.

Settlement will occur in 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 deceased leaving an unsigned Will. The intestacy required significant legal correspondence between family members located in a number of overseas countries. Translation of the correspondence was also required. This caused delays as you were not able to dispose of the dwelling until the letters of administration were granted. This delay prevented you from disposing of the dwelling within the two year time limit.

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