Private ruling: Commissioner's discretion to extend two year time period
Published: March 2014
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Will the Commissioner exercise 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 the specified date? | Yes.

Relevant facts and circumstances: The deceased passed away in the 2011-12 income year. The deceased did not leave a will. There were delays caused as a result of the deceased not leaving a will. The property was the main residence of the deceased prior to the date of death and the property has not been used to gain or produce assessable income since the deceased's death, and will not be used as such until the date of sale.

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, the deceased died in the 2011-12 income year and the dwelling was their main residence prior to the date of death. The delay is due to circumstances outside of your control primarily caused by the deceased not leaving a will. For these reasons, the Commissioner will exercise his discretion to allow an extension to the two year time period until the specified date.