Private ruling: CGT - deceased estate, two year extension
Published: May 2013
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2012

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 to 20 June 20YY? | A1: No

Relevant facts and circumstances: The deceased died in year ended 30 June 20XX. The deceased left a 50% interest in the house (the property) to the beneficiaries. The other 50% interest in the property is held by the deceased's surviving spouse. The property was initially the principal residence of the deceased, but is now rented. The beneficiaries and surviving spouse have not been able to reach an agreement to sell the property. A real estate agent has not yet been engaged to sell the property.

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

Reasons for decision: Summary: As per subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997), a capital gain or capital loss you make from a capital gains tax (CGT) event that happens in relation to a dwelling, or your ownership interest in it, is disregarded if: (a) you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and (b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied. | Detailed Reasoning - And also one of these items: 1 the deceased *acquired the *ownership interest 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 your *ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner ........... 2 the deceased *acquired the *ownership interest before 20 September 1985 the *dwelling was, from the deceased's death until your *ownership interest ends, the main residence of one or more of: (a) the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or (b) an individual who had a right to occupy the dwelling under the deceased's will; or (c) if the *CGT event was brought about by the individual to whom the *ownership interest *passed as a beneficiary - that individual In this case, when the deceased died a 50% interest in the property passed to the beneficiaries, and the other 50% interest was held by the deceased's surviving spouse. The property has been used to produce assessable income prior to and following the deceased's death. The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion to extend the time period in which you can dispose of the property: · 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 determining whether or not to grant an extension the Commissioner is expected to consider whether, and to what extent, the dwelling is used to produce assessable income and how long the trustee or beneficiary held it. In this case, the delay in selling the property has been caused by the two parties who own the property being unable to agree on the sale of the property. You have not been able to engage a real estate agent to market the property because of this discord between the owners. The reason for your delay is not in accordance with a situation in which the Commissioner would be expected to exercise the discretion to extend the time period for disposal of the property. Having considered the relevant facts, the Commissioner is unable to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit to 20 June 20YY.