Private ruling: Capital gains tax
Published: October 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Will the Commissioner exercise 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? | Yes.

Relevant facts and circumstances: The deceased passed away in the year ended 30 June 20XX. The property was sold in the year ended 30 June 20YY. The delay was caused by the amount of work that needed to be done before the property could be sold, including removing the deceased's property from the estate. An exhaustive decontaminating of the property was also required before the property could be listed for sale as the dwelling contained asbestos and was not safe. The asbestos removal also took considerable time. The dispersed locations of the beneficiaries, and their employment obligations, also added to the delay in the timeframe in which the property was able to be listed for sale. The property was the main residence of the deceased prior to the date of death, and has not been used to gain or produce assessable income since the date of death.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-130. | Income Tax Assessment Act 1997 Section 118-195.

Reasons for decision: Summary: When a person inherits a deceased person's dwelling, they may be exempt or partially exempt when a capital gains tax (CGT) event happens to it (for example, they sell it). Where the dwelling is sold within two years of the deceased's death, the trustee or beneficiary can disregard the capital gain or capital loss resulting from the sale. A trustee or beneficiary of a deceased estate may apply to the Commissioner to grant an extension of the two year time period, where the CGT event happens in the 2008-09 income year or later income years. Generally, the Commissioner would exercise the discretion in situations where the delay is due to circumstances which are outside of the control of the beneficiary or trustee, for example: • 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. In exercising the discretion the Commissioner will also take into account whether and to what extent the dwelling is used to produce assessable income and for how long the trustee or beneficiary held the ownership interest in the dwelling. In your case, the property was unable to be listed for sale until the deceased's belongings were removed and the property was safe and free of asbestos and this took some time. The property was never used for income producing purposes. For these reasons, the Commissioner will exercise his discretion to allow an extension to the two year time period.