Edited version of private advice

Authorisation Number: 1051904031417

Date of advice: 13 October 2021

Ruling

Subject: Capital gains tax

Question

Will the Commissioner exercise his discretion under section 118-195 of the Income Tax Assessment Act 1997 to extend the two-year period to dispose of the dwelling until the date of settlement?

Answer

Yes. Having considered your circumstances and the relevant factors, the Commissioner will extend the two-year period to dispose of the dwelling to the date of settlement. 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

Year ended 30 June 20xx

Year ended 30 June 20xx

The scheme commences on:

1 July 20xx

Relevant facts and circumstances

The deceased died in July 20xx leaving a will. The Executors and Trustees (the Trustee) named in the Will are the children of the deceased.

Probate of the Will was granted to the Trustee by the Supreme Court.

The property was the deceased's main residence for the whole of their ownership period.

The property was purchased on more than a decade ago by the deceased.

The property was never used to produce income.

The property was less than X hectares being a unit dwelling.

The reasons for the property not being sold within the two-year period was due to a leak coming from an adjacent Unit, the property above the deceased's Unit, which needed to be repaired prior to sale. In addition to the leak the pandemic delayed the repair of the leak and contributed to the delay in the sale.

The deceased's Unit was being prepared for sale following a meeting with the real estate agents several months after death. It was during the agents' inspection of the property that a water leak was found.

Significant damage had occurred due to the leak and this was not the first time that a leak had been detected. On two previous occasions leaks were detected and assurances were given that the leaks had been repaired.

During the next few months many discussions were had with the owner and manager of the above Unit along with the body corporate and insurance company as to liability for the leak and damage to the ensuite of the deceased's Unit. During this period, inspections were undertaken by various trades people, including carpenters, plasterers, and plumbers.

You demanded that the repair was done properly and quickly as you wanted the property to be sold.

Once liability was agreed to the repair needed to be attended to and this required that trades people had access not only to your property but also the property above for the leak to be repaired properly.

This took time as the above Unit was tenanted and negotiation as to access was needed to be done because while the repair work was carried out the tenant would not be able to use their ensuite bathroom until fully repaired.

Approximately ten months after the date of death the plumber that attended the repair work advised that there was a waterproofing issue and that the leak would not be fixed unless the waterproofing was fixed.

Work commenced on the repairs in the following month and were completed within a few weeks.

After several days monitoring the ensuite ceiling without any sign of moisture, you proceeded to organise for your trades people to undertake repairs to the ensuite in the property.

Later in the same year you advised the property manager of neighbouring Unit that repair work to the deceased's property's ensuite bathroom was halted due to water damage still occurring from their Unit bathroom immediately above.

More inspections occurred on your property and the above property and the leak was finally repaired to your satisfaction a couple of months later.

The repair to your property was completed shortly thereafter but was delayed due to difficulties getting trades people over the Christmas period.

You got real estate appraisals again after the leak had been fixed.

This coincided with the Covid-19 pandemic and government-imposed travel restrictions including lockdowns.

You were advised to suspend the sale and resume once the restrictions were eased.

The property was for sale on an open listing.

When it did not sell immediately a more targeted sale marketing approach was taken.

A contract for sale was entered into later in the year and settlement took place on a few weeks later.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195