| Disclaimer This edited version has been archived due to the length of time since original publication.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. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private advice
Authorisation Number: 1051682073502
Date of advice: 21 May 2020
Ruling
Subject: Deceased estate two year discretion
Question
Will the Commissioner exercise his discretion to extend the 2 year period under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) for a property?
Answer
No, the Commissioner will not exercise his discretion and extend the 2 year time limit.
This ruling applies for the following periods:
Year ended 30 June 2017
Year ended 30 June 2018
Year ended 30 June 2019
Year ending 30 June 2020
The scheme commences on:
1 July 2016
Relevant facts and circumstances
The deceased passed away a number of years ago.
The deceased built the house a number of years ago.
The property was less than 2 hectares.
The property was the deceased's main residence for the whole of his ownership period.
The property was not rented out.
Probate granted late 20XX.
You were the sole person in sorting through the house and the deceased's belongings.
The property put on market late 20XX for auction in late 20XX.
There were no bidders at auction, and property put up for sale.
Termites found in property late 20XX and treated twice.
Pest company completed final inspection early 20XX.
The property was taken off the market, and repairs to property started early 20XX.
Repairs completed, and property put back on market late 20XX.
Property sold early 20XX.
Settlement date mid 20XX.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 118-195
Reasons for decision
Subsection 118-195(1) of the ITAA 1997 states that if you own a dwelling in your capacity as trustee of a deceased estate (or it passed to you as a beneficiary of an estate), then you are exempt from tax on any capital gain made on the disposal of the property if:
· the property was acquired by the deceased before 20 September 1985, or
· the property was acquired by the deceased on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death and was not then being used for the purpose of producing assessable income, and
· Your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances).
You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed).
In this case, the deceased acquired 100% interest in the property in 19XX and passed away in 20XX. The property was the main residence of the deceased until their death
The Commissioner can exercise his discretion in situations such as where:
· 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); or
· settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary or trustee's control
Application to your circumstances
You inherited joint ownership of the property after the deceased passed away mid 20XX.
There has been no challenge to the will, the estate was not complex, there were no unforeseen or serious personal circumstances that prevented the sale, and the delay in selling the property is not due to circumstances beyond the beneficiary or trustee's control.
While we appreciate your circumstances, that you had been the sole person sorting through many years of memories and belongings, as well some repairs and maintenance keeping the property looking presentable, and misunderstanding of the 2 year time limit rule, these are of a different nature to the situations in which the Commissioner can exercise his discretion. Having considered the relevant circumstances, the Commissioner will not exercise his discretion and extend the 2 year time limit.