Private ruling: Capital Gains Tax - Deceased Estates
Published: April 2015
Ruling period: Year ending 30 June 2015. | Year ending 30 June 2016.
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 the relevant financial year. You were appointed Executor of the Will. The deceased property was their main residence and was purchased prior to 1985. The property has never been used to produce assessable income and has remained empty since the deceased passed away. You have no intention of renting the property out. After the deceased passed away you dealt with the legal matters relating to probate (which you did without the assistance of a lawyer). The property held the accumulated paperwork and possessions of your late relatives. For a number of months you sorted, packed up and cleaned the property. Some possessions are of historical significance. It took time for you to search for the appropriate persons to assess, value and archive these items. You have now put the remainder of the historical items into storage to come back to later in order to avoid further delays finalising with the property. You intensively cared for both the deceased and another family member in their last years and you were Executor of another family member's estate which took years to finalise due to issues with their Will. You have suffered from illness in the past and must look after your own health. The property was listed for sale on the market in 20XX. An auction was organised, but subsequently cancelled due to a lack of interest. The property is still listed for sale on the open market. The property is reasonably priced, but one side backs on to a main road.

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 or beneficiary 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. In your case, it took a considerable amount of time to finalise matters of the estate due to the amount and significance of accumulated possessions. You also have suffered from illness and are limited in your activities. Additionally, although reasonably priced, the property has not had the interest anticipated. You are doing everything in your power to sell the property and the property will remain empty until sold. 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.