Private ruling: Capital gains tax deceased estate 2 year discretion
Date of advice: 24 November 2016
Published: April 2017
Ruling period: Year ending 30 June 20YY
Date scheme commenced: 1 July 20XX

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 to 20YY? | A1: Yes

Relevant facts and circumstances: You are one of two beneficiaries of a deceased estate. The deceased passed away 20WW. One of the assets of the deceased estate was the deceased's main residence, (the property). You wished for the property to be sold, however, the other beneficiary did not wish to part with the property. You approached a real estate agency in 20XX to begin the process of selling the property. The property was not put on the market until 20YY. You have provided evidence that you approached a real estate agent to sell the property before the 2 year exemption period expired. The property was contacted for sale and settlement took place 20YY.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows a trustee of a deceased estate to disregard a capital gain or loss from a dwelling if: ● the property was acquired by the deceased before 20 September 1985, or ● the property was acquired by the deceased on or after 20 September 1985 and the dwelling 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, 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 following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion: ● 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 (eg 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 reasons outside the beneficiary or trustee's control. Having considered the particular circumstances of this case, 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.