Private ruling: Capital gains tax – deceased estate – Commissioner’s discretion to extend the two year period
Date of advice: 5 July 2017
Published: November 2017
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 pre capital gains tax (CGT) residence (the dwelling). The deceased passed away in early 2013 (the deceased). The dwelling was the deceased’s main residence. One of the deceased’s children was appointed executor of the deceased’s estate. Prior to and following the deceased’s passing, the executor was suffering from a chronic health condition, that lead to serious complications and side effects. The executor commenced legal action in mid 2014 to renounce probate and have another sibling appointed as executor. The executor continued to be ill throughout 2014 and 2015 and required surgery in late 2014. The executor’s sibling had a chronic health condition which deteriorated in 2014, requiring lengthy periods of hospitalisation during 2014 and 2015. As a result of the sibling of the executor being ill, the application to renounce probate was discontinued. The executor’s sibling passed away in mid 2015. Probate of the deceased’s estate was granted in late 2015. Settlement of the contract for the sale of the dwelling occurred in late 2016.

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. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.