Edited version of private advice

Authorisation Number: 1051928531167

Date of advice: 1 December 2021

Ruling

Subject: Commissioner's discretion - inherited dwelling

Question

Will the Commissioner allow an extension of time for you to dispose of your ownership interest in the dwelling and disregard the capital gain or loss you made on the disposal?

Answer

No.

This ruling applies for the following periods:

30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The deceased acquired the property prior to 20 September 1985.

The deceased passed away on XX/XX/XXXX.

On XX/XX/XXXX Probate was granted to the executors.

The deceased's main residence was valued at probate, a prospective buyer offered to purchase the property at the valued price within the two-year timeframe.

This offer was not accepted, as the executors and other beneficiaries had disagreements regarding the property value.

The property was listed on the market in October 20XX and it stayed on the market until July 20XX.

During this time offers of purchase were not accepted by the executors.

In July 20XX another property valuation was done. Shortly after valuation was completed another offer for purchase was presented and through negotiations this offer was then accepted.

The settlement of the property was finalised on XX/XX/XXXX

Relevant legislative provisions

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

Reasons for decision

Practical Compliance Guideline PCG 2019/5: The Commissioner's discretion to extend the two-year period to dispose of dwellings acquired from a deceased estate outlines the factors that the Commissioner will consider when determining whether or not to exercise their discretion to extend the two-year period under section 118-195 of the Income Tax Assessment Act 1997. Generally, the Commissioner will allow a longer period where the sale of the dwelling could not be settled within two years of the deceased's death due to reasons beyond your control.

In considering whether to extend the two-year period all the factors both in favour and against the granting of the Commissioner's discretion must be considered.

It is noted that a valuation during probate was completed, with the intentions of selling the deceased's main residence within the two-year period.

However, due to disagreements relating to the value of the property, including wanting to obtain proceeds above the initial valuation, and the breakdown of relationships between all parties involved, the property was not sold within the two-year period. Several offers from potential buyers were not accepted. PCG 2019/5 states that waiting for the market to improve is a factor that would weigh against the exercise of the discretion.

We have considered all your circumstances and as there was a significant period of delay that was not outside of your control, the Commissioner will not exercise the discretion to grant an extension of time.

Therefore, any capital gain made on the property from the date the deceased passed away until the property was disposed of will be subject to tax. That is, the first element of your cost base for the property is its market value on the deceased's date of death. You are also entitled to the 50% CGT discount in relation to the property.