Private ruling: Deceased estates
Date of advice: 10 January 2020
Published: March 2020
Ruling period: Year ending 30 June 2020
Date scheme commenced: 1 July 2019

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. As essential requirement of applying subsection 118-195(1) of the ITAA 1997 is that a dwelling exists on the land. Section 118-160 of the ITAA 1997 states that if a dwelling that was your main residence is accidently destroyed and a capital gains tax (CGT) event happens in relation to the land on which it was built without you erecting another dwelling on the land, you can choose to apply the main residence exemption to the land, as if the dwelling had not been destroyed and was still your main residence. In this way you can treat the disposal of the property as if you had disposed of a dwelling that was your main residence. Having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time. Further information about this discretion can be found by searching 'QC 52250' on ato.gov.au

Relevant facts and circumstances: The deceased purchased a property (the dwelling) in joint names with their spouse sometime before 20 September 1985. They lived in the dwelling as their main residence. The land does not exceed two hectares. It has never been used to produce assessable income. The deceased's spouse passed away after 20 September 1985. The spouse's ownership interest passed to the deceased. The deceased now had two ownership interests in the dwelling, their original interest and the interest received from their spouse upon their death. The deceased continued to live in the dwelling as their main residence. On the day of the deceased's death, the market value of the property was approximately $X! A disaster demolished the home and the deceased passed away. Once the coroner's report was completed, insurance related issues were addressed, council requirements needed to be met, personal effects were salvaged from the wreckage, and the remains of the home were bulldozed. Two insurance payouts were received, one for house contents and one for the building and removal of the wreckage. The property was sold by the trustees of the estate. It was sold as a vacant block. Contracts were exchanged and settlement occurred in 20XX, over two years after the deceased's date of death.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-160 | Income Tax Assessment Act 1997 section 118-195