Edited version of private advice

Authorisation Number: 1051645593043

Date of advice: 13 March 2020

Ruling

Subject: Commissioner's discretion to extend to 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 until settlement?

Answer

Yes. Having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time. Further information about this discretion can be found by searching 'QC 52250' on ato.gov.au

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

A property was purchased in September 20XX by the deceased. The property was the deceased's principle place of residence.

The property was never rented for income producing purposes.

The deceased passed away XXXX 20XX.

An application to challenge the estate was lodged.

A real estate agent was hired to advise on the sale of the property. Based on advice from the real estate agent minor renovations were done and the inside repainted.

The property was put on the open market, however no offers were forthcoming.

No offers were received to purchase the property.

The property was then placed back on the market at a reduced price.

An offer was received, however the sale fell through.

The contract for the sale of the property was finally received more than 2 years after the deceased's death.

Reasons for Decision

Under section 118-195 ITAA 1997, a full exemption can apply on sale of a dwelling inherited from a deceased individual if the property was the deceased's main residence just before their death and was not being used to produce income at that time and either:

·         The property is sold within 2 years of the date of death (the Commissioner can extend this period); or

·         The property has been the main residence of the deceased's spouse, someone granted a right to live in the property under the terms of the deceased's will or the individual beneficiary who is selling the property from the date of death until the property is sold.

Furthermore, on 27 June 20XX, the Commissioner introduced Practical Compliance Guideline PCG 2019/5 which provides the executor with a safe harbour where the deceased's property cannot be sold and settled within 2 years of the deceased's death.

In certain circumstances you're exempted from capital gains tax (CGT) on an inherited dwelling if you dispose of your ownership interest within two years of the person's death.

You can apply to us to extend the two-year period. Generally, we would grant the extension if the delay is due to circumstances outside your control, such as:

·         the ownership of a dwelling or a will is challenged

·         the complexity of a deceased estate delays the completion of administration of the estate

·         a trustee or beneficiary is unable to attend to the deceased estate due to unforeseen or serious personal circumstances arising during the two-year period (for example, the taxpayer or a family member has a severe illness or injury)

·         settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary's or trustee's control.

Having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time. Further information about this discretion can be found by searching 'QC 52250' on ato.gov.au

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10,

Income Tax Assessment Act 1997 section 118-195

Income Tax Assessment Act 1997 subsection 118-195(1)