Edited version of private advice

Authorisation Number: 1052182306301

Date of advice: 24 October 2023

Ruling

Subject: Commissioner's discretion - extension of time

Question

Will the Commissioner allow an extension of time under section 118-195 of the Income Tax Assessment Act 1997 for you to dispose of your ownership interest in the dwelling and disregard the capital gain you make on the disposal?

Answer

No.

This ruling applies for the following period

Year ending 30 June 20xx

The scheme commenced on

01 July 20xx

Relevant facts

The deceased acquired a property located. (The property)

The deceased passed after 20 September 19XX. (The deceased)

The property was held on trust by person A until you turned 18 years of age.

You turned 18 on XX XX 20XX.

The property was occupied from XX XX 20XX by your relative, (relative A) and relative (relative B) who was a child.

Relative A and relative B also resided with the deceased prior their passing.

Relative A refused to vacate the property.

You were required to pay the rates, electricity and insurance for the dwelling as relative A either refused to contribute or gave very little towards the expenses.

You did not enter into a rental agreement with relative A in relation to the occupation of the property.

You commenced the eviction process on XX XX 20XX.

The eviction process required a Court order which took place on XX XX 20XX.

Relative A and relative B vacated the property on XX XX 20XX pursuant to the orders of the Court.

The house was deemed unliveable due to uncovered asbestos, faulty electrical wiring and other factors.

You obtained a loan of $ on XX XX 20XX to demolish the house and subdivide the land. During this period, you had been unemployed for a period of time.

The property was demolished on xx xx 20xx.

During the period from xx xx 20xx and xx xx 20xx the subdivision was conditionally approved but you could not find a land works company to install a retaining wall and storm water drain with the amount of funds you had borrowed.

You placed the now vacant land on the market on xx xx 20xx.

You accepted an offer for the vacant land on xx xx 20xx for $x.

You have made a capital gain as a result of the sale of the vacant land.

You acquired a new dwelling on xx xx 20xx.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 118-195

Reasons for decision

Detailed reasoning

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 19XX, or

•         the property was acquired by the deceased on or after 20 September 19XX 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).

The deceased acquired a property.

The property was the main residence of the deceased until they passed away.

The Commissioner can exercise their discretion in situations 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

In this case, there has been no challenge to the will and the estate was not complex. While there were serious personal circumstances that prevented the sale with an unapproved occupant, the eviction process did not commence for over X years.

The deceased died in xx xx 20xx and you turned 18 years of age a short time later.

You commenced legal proceedings to evict relative A from the property and this was completed on XX XX 20XX.

You then decided to demolish the property as it was deemed unliveable. The demolition took place on XX XX 20XX.

As a result of the dwelling being demolished the resulting asset is vacant land.

CGT event A1 happened on XX XX 20XX when you disposed of the land as there was not a dwelling on the land there is no main residence exemption available.

The circumstances are of a different nature to the situations in which the Commissioner can exercise discretion as there is no dwelling on the land. Having considered the relevant circumstances, the Commissioner will not exercise his discretion and extend the two year time limit.