Private ruling: Capital gains tax
Published: March 2015
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: Yes.

Relevant facts and circumstances: The deceased passed away in 20XX. The deceased owned a property which was purchased prior to 1985. It was their main residence until they passed away. Probate was delayed due to a number of codicils to the will. The executors engaged lawyers to execute the probate documents and it was eventually granted in 2014. The property was transferred to the beneficiaries in the relevant year. The property has been sold and settlement will occur in the relevant year. The property has been occupied by rental tenants since the date of death.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 states that if your ownership interest in a dwelling passed to you as a beneficiary in a deceased estate, then you are exempt from tax on any capital gain made on the disposal of the property if: • the property was acquired by the deceased before 20 September 1985, 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 Commissioner can exercise his discretion in situations such as where: • 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 You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed). Having considered the circumstances and the factors outlined above, the Commissioner will exercise his discretion to extend the 2 year period.