Edited version of private advice

Authorisation Number: 1051999855612

Date of advice: 30 June 2022

Ruling

Subject: CGT - inherited property

Question

Will the Commissioner exercise his discretion to extend the two year limit to apply the capital gains tax main residence exemption for a property that was the deceased's main residence at the time of their death?

Answer

Yes. Having considered the circumstances and relevant factors you have provided; the Commissioner will exercise his discretion and allow an extension of the 2-year limit for an exemption from CGT on the disposal of an inherited property. CGT is disregarded from the deceased's date of death until the disposal of your ownership interest in the property. Further information about this discretion can be found by searching 'QC 66055' on ato.gov.au.

This ruling applies for the following period:

Period ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The date of deceased was XX XX 20XX.

Property is located at XXXX.

The property was the main residence of the deceased at the time of death.

The executors had legal challenges to the will, in particular the ownership of the property.

Probate was granted XX XX 20XX.

Due to a legal notice the executor was not able to distribute, liquidate, or dispose of any part of the estate.

The terms of settlement brought the proceedings to an end on XX XX 20XX.

The date of order legal proceedings ended on XX XX 20XX.

After legal proceedings ended, the Covid-19 lockdowns in XX prevented the property being with a real estate as they were unable to visit and assess the property's value.

The executors were living in XX and were not able to attend the property as a result of lockdowns and state border closures.

Contractors were not able to be authorized to attend the property under very strict restrictions. Therefore, necessary work to sell the house could not be performed.

In XX 20XX, there was a brief lifting of border closures, enabling the Executors to fly into XX from XX; and during that time, they visited with Real Estate agents to discuss the prospect of selling.

During the visit the Executors became aware of a major leak caused by the floor heating pipes bursting and flooding.

The construction industry in XX was in Christmas shutdown.

After the Christmas shutdown and following assessments by builders and insurers, it was determined that it was necessary for the floors and walls to completely dry out, to ensure that no mould developed.

The lockdowns had caused large backlogs of work for tradespeople and delayed their being able to start work. Further lockdowns in 20XX resulted in more delays.

The floor was re-done and sealed, cupboards were put back, and the pipes all replaced.

After the completion of the work, a valuation was undertaken, and a real estate agent was appointed on XX XX 20XX (approximately XX weeks after the repairs). The house was cleaned, styled, and photographed for sale.

Having the property viewed was difficult due to COVID-19 restrictions. The sale process was completed remotely by telephone, video conferencing, and texts.

In XX 20XX, storms knocked over a neighbour's tree that damaged a fence and the tennis court on the property. Repairs were delayed due to supply shortages.

The contract of sale was signed XX XX 20XX.

The settlement date was XX XX 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195