Private ruling: Capital gains tax- Commissioner's discretion to extend the two year period
Published: January 2017
Ruling period: Year ended 30 June 2015.
Date scheme commenced: 1 July 2014.

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: No.

Relevant facts and circumstances: The deceased acquired the dwelling before 20 September 1985 as tenant in common. The deceased later acquired full ownership of the property after the death of their spouse. The deceased passed away in 20XX. The dwelling was the deceased's main residence for the full period of ownership. The deceased did not leave a will, and you were granted letters of administration of the estate. You inherited the property in your capacity as beneficiary of the estate as tenants in common in equal shares with your sibling. Your sibling resides overseas. You live in a different State to the dwelling. You suffer from a medical condition, which began affecting you in the year the deceased passed away. You later underwent surgery in relation to your condition. You became aware of another medical condition after the deceased passed away. You took responsibility for preparing the property for sale. You travelled to the dwelling approximately monthly in order to attend to the property. You attended to work in the garden, and a major renovation was undertaken, during which the kitchen and the bathroom were replaced. The sale of the dwelling was settled in early 20XX (around four years after the deceased passed away). Certain documents were provided to support these statements. They are to be read with and form part of the description of the scheme for the purpose of this ruling. ● Death certificate ● Letters of administration ● Transfer of land and title documents ● Medical certificate ● Letters from medical specialists ● Medical reports

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 not 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. In your situation, you should have been aware that there were conditions that had to be met if the sale of the property was to be exempt from the capital gains provisions. Given the great distance from your home to the dwelling, travel on a monthly basis would not appear to be a prudent course of action where your medical conditions prevented you from effectively preparing the property for sale within the two year time limit. It is accepted that you did make these journeys, however the distance travelled cannot be considered a mitigating factor in your delay in disposing of the dwelling where third parties could be, and were, engaged to undertake the work. The nature of the works completed on the dwelling reflect an effort to increase the value of the property, rather than necessary repairs. While the house and garden may have become run-down or outdated, these factors would not have prevented you from disposing of the dwelling in a timely manner. The time delay caused by the completion of renovations intended to increase the sale price of the property is not a valid reason to extend the Commissioners discretion. While we appreciate your particular circumstances, the period taken to dispose of the dwelling is too lengthy. Having considered the relevant facts, the Commissioner will not apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit. The normal capital gains tax (CGT) rules will apply to the disposal of the property.