Private ruling: CGT - deceased estate - main residence exemption
Published: November 2014
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

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 201X. The deceased moved into their main residence in 198X. The property was the deceased's main residence until their date of death. The property was not used by the deceased for the purpose of producing assessable income. There were significant delays in finalising the administration of the estate as the deceased did not have a Will in place and died unexpectedly. The settlement of the property was also delayed due to problems with the purchaser getting or transferring finance by the original date set. The property settled after the two year time period had lapsed.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195.

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 states that if you are an individual who owns a dwelling in a capacity as trustee of 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 on or after 20 September 1985 and the property 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; or the property was acquired by the deceased before 20 September 1985; and • your ownership interest ends within two years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). In your case the deceased acquired the property in 198X and the deceased passed away in 201X. The property settled outside the time limit. The property was sold outside the two year period outlined in subsection 118-195(1) of the ITAA 1997. Therefore, you will only be able to disregard the capital gain from the sale of the property if the Commissioner grants an extension to the two year time limit. 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 In your case, the delay in the disposal of the property was caused by delays in administration of the estate and delays on behalf of the purchasers financing. Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit. Accordingly, you will be able to disregard the capital gain that arose as a result of the disposal of the property.