Private ruling: Capital gains tax
Published: October 2014
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Question and answer | Will the Commissioner exercise the 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 20XX. The dwelling was the main residence of the deceased prior to the date of death, and was not used to gain or produce assessable income at any time after the deceased's death until the settlement date. The dwelling was sold at auction in 20YY. Settlement was due to occur prior to two years after the deceased's date of death. A few days before settlement, the purchaser advised that they were unable to settle until the next business day. Settlement occurred two years and two days after the deceased's 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, given that the settlement was due to occur within the two year time frame and did in fact occur only two days outside of the two year time frame, due to the actions of the purchaser, the Commissioner will exercise his discretion to allow an extension to the two year time period.