Private ruling: Commissioner's discretion
Published: March 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

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

Relevant facts and circumstances: For some time prior to their death, the deceased suffered from a medical disorder. During this time a third party orchestrated a new will for the deceased leaving them as the only beneficiary of the deceased's estate. The deceased's will was challenged based on their medical state prior to their death. The will was found not to be legitimate and Letters of Administration were granted. Settlement of the property occurred outside the two year period. The property was the deceased's principal place of residence.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 118-195(1)

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 states that if you are an individual who owns a dwelling in a capacity as trustee of a deceased 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 on or after 20 September 1985 and the property 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; or the property was acquired by the deceased before 20 September 1985; and · your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). The Commissioner can exercise his discretion in situations such as 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 The property was used as the deceased's main residence. Due to the deceased's will being challenged the property was not sold within 2 years of the deceased's death. In your case the Commissioner considers it appropriate to exercise his discretion to extend the 2 year time limit. The exemption period will be extended until the date of settlement.

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