Private ruling: Capital gains tax - deceased estate - Commissioner's discretion
Published: May 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Will the Commissioner exercise his discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) in your particular circumstance? | A1: No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The deceased and their relative, (person A) jointly purchased a property as tenants in common, each with a 50% interest. The deceased and person A acquired the property from family members prior to 20 September 1985. Over the years both the deceased and person A have resided in the property as their main residence and at times they have co-resided in the property. The deceased passed away almost two years ago. The deceased was residing in rented accommodation when they died but they had made the choice to continue to treat the property as their main residence under the six year main residence absence exemption rule. Person A continued to reside in the property until they were placed in an aged care facility, where they are still currently residing. You believe the following reasons support your request for the Commissioner's discretion: · person A has no descents of their own · the Last Will and Testament of person A nominates the same surviving descendants and beneficiaries of those nominated in the Last Will and Testament of the deceased · the named beneficiaries of each Last Will and Testament are the same · the nominated beneficiaries are bequeathed in each Last Will and Testament, the right title and interest in the share of the property and are do so in equal shares as tenants in common to the property, and · ultimate ownership on the passing of both the deceased and person A will be shared equally amongst the named beneficiaries.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 118-195 | Income Tax Assessment Act 1997 Section 118-200

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. Due to recent changed to section 118-195 of the ITTA 1997, the Commissioner now has discretion to extend the two-year period in the Act where: · the ownership of a dwelling or 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 unforseen 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 for sale over the dwelling is unexpectedly delayed or falls through or circumstances outside the beneficiary or trustee's control. In your case, the deceased's interest the property was not disposed of within two years from their death was due to person A residing and owning the other interest in the property. We acknowledge that it makes it difficulty of disposing of the deceased's interest in the property. But based on the information provided, we believe that you do not meet the criteria in which the Commissioner may exercise his discretion to extend the two-year period in which a deceased's main residence must be disposed of. The normal capital gains tax (CGT) rules apply to the disposal of the property. | Detailed Reasoning - CGT: The most common CGT event CGT event A1 occurs when you dispose of an asset to another entity. The time of the event is when you enter into the contract for disposal of it, or if there is no contract when the change of ownership occurs. If two or more people acquire a property asset together it can be either tenant's in common or as joint tenants. If a tenant in common dies, their interest in the property is an asset of their deceased estate. This means it can be transferred only to a beneficiary of the estate or be disposed of (or otherwise dealt with) by the trustee/s of the estate. | Detailed Reasoning - Deceased estate - main residence: Special rules apply of the asset was the deceased person's main residence. If you inherit a deceased person's dwelling, you may be exempt or partially exempt when a CGT event occurs to it. For more information on how CGT applies please see the enclosed information. This information has been taken from the Guide to capital gains tax 2011-12 (NAT 4151). Information is also available on our website - www.ato.gov.au.