Private ruling: The Commissioner’s discretion to extend the two year time limit to dispose of a dwelling
Date of advice: 16 August 2018
Published: October 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 a dwelling after 20 September 1985. The deceased passed away a number of years later. The dwelling was the deceased’s main residence. The deceased had three adult children. You were the executor of the estate. The dwelling was transferred into your name as executor of the estate. One child was very ill and lived with the deceased for a number of years before the deceased’s passing. The Will provided the ill adult child with a right to reside in the dwelling until their death, at which point the dwelling was to form part of the deceased’s estate. The adult child passed away several years later. The dwelling was then able to be sold and settlement occurred within four months of the adult child’s death.

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. | 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. We have taken the facts of your situation into consideration when determining whether the Commissioner’s discretion would be exercised to extend the two year period and allow you to disregard any capital gain or capital loss made on the disposal of the dwelling under subsection 118-195(1) of the ITAA 1997. We accept that the reason for the delay in the disposal of the deceased’s dwelling was due to the above mentioned issues arising during the two year period after the deceased had passed away. Using the guidelines provided above and having considered the relevant facts of your situation, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit until settlement date. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.