Edited version of private advice

Authorisation Number: 1051890711351

Date of advice: 31 August 2021

Ruling

Subject: Commissioner's discretion to extend the two-year time limit to dispose of an inherited house

Question

Will the Commissioner allow an extension of time to late 20XX for you to dispose of your ownership interest in the house and disregard the capital gain you make on the disposal?

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 66057' on ato.gov.au.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

At some time before 1985, the deceased and their spouse bought the house as joint tenants. The house was never rented out and was the deceased main residence until they entered aged care.

In 20XX, the deceased's spouse passed away and the deceased inherited their ownership interest.

In 20XX, the deceased entered into aged care. The deceased chose to continue to treat the house as their main residence.

In mid-20XX, the deceased passed away. They appointed their children as joint executors and trustees, who each received equal shares of the house.

There were delays due to disagreements as one trustee did not want to sell the property. The trustee was very emotionally attached to the property. The trustees finally agreed to sell but it was not for some time and after many disagreements. The sale of the property could not be arranged without consent from both executors.

Further delays were due to getting the property ready for sale because all of the possessions of the deceased and their spouse were still at the property. The trustees both had work and family commitments. There were no significant improvements made to the house.

During 20XX, the spouse of one of the trustees who was helping to get the property ready for sale underwent a serious medical procedure. This caused a further delay in getting the property ready for sale as they were directed not to do any heavy lifting (not more than 5 kg) after the procedure.

In early 20XX, the trustees appointed a real estate agent and instructed them to sell the property (exchange contracts) within the two-year period allowed by the Commissioner. Unfortunately, the agent did not market the property well and no offers were forthcoming.

In mid-20XX, the trustees appointed a new real estate agent and the house sold quickly. Shortly after, the house settled. The purchaser required a longer than normal settlement period to obtain funds from overseas.

Relevant legislative provisions

Income Tax Assessment Act 1997 subdivision 115-A

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 118-120

Income Tax Assessment Act 1997 section 118-130

Income Tax Assessment Act 1997 section 118-195