Private ruling: CGT – deceased estate – Commissioner’s discretion to extend the two year period
Date of advice: 28 November 2017
Published: April 2018
Ruling period: Year ended 30 June 2017.
Date scheme commenced: 1 July 2016.

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the two year period? | A1: Yes.

Relevant facts and circumstances: The deceased acquired an interest with their partner (‘A’) in a dwelling (the dwelling) The deceased passed away in 201X. (The deceased) The dwelling was the deceased’s main residence. The dwelling was not used to produce assessable income. The deceased separated from their partner a number of years prior and entered into a separation agreement. A term of the agreement was that ‘A’ would transfer their interest in the dwelling to the deceased. The transfer was stamped at the relevant Government office a short time later. The executor subsequently determined that the transfer was not registered and title was still registered in joint names. The executor engaged legal representatives around 201Y to complete the process of transferring the interest in the dwelling to the estate. This process was delayed due to illness of the original legal representative and subsequent appointment of new legal representatives. The legal representatives experienced difficulties in obtaining an exemption for stamp duty. An objection to the assessment for stamp duty was lodged in 201Z. This was unsuccessful and caused delays. The executor considered commencing legal proceedings in relation to the assessment, however due to the potential costs associated with this and the uncertainty this was not commenced. The stamp duty was paid a short time later in 201Z. The legal representatives experienced further delays with registering the title as further certified copies of the notice of death form was requested. The legal representative attended the Government office in 20ZZ and met with a senior officer regarding registering the transfer into the estate. The title transferred a short time later in 20ZZ. The dwelling was prepared for sale. The property was listed for sale and settlement occurred in 20ZZ.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 118-130(3) | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision: Summary: The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time until settlement. | Detailed Reasoning - Detailed reasoning: The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person’s estate sell that dwelling within two years of the date of death. Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was: ● Acquired by the deceased before 20 September 1985, or ● The deceased’s main residence when they died. The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the Will is challenged). There must not be any other factors mitigating against exercising it. In your case, the delay in disposing of the dwelling was due to the title of the dwelling being incorrectly recorded. This delay prevented you from disposing of the dwelling within the two year time limit. The Commissioner accepts that it is appropriate to grant the extension that you have requested.