Private ruling: CGT exemption
Date of advice: 16 December 2015
Published: February 2016
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 20XX

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: No.


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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 provides that if you own a dwelling in your capacity as trustee of a deceased estate (or it passed to you as a beneficiary of an 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 before 20 September 1985; 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; | Detailed Reasoning - and: • your ownership interest ends within two years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed). In this case, the property was the main residence of the deceased until they passed away. 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 this case, you had an ownership interest in the property after the deceased passed away. The beneficiaries were hoping for a high price for the property, however were unable to obtain this. The property was not listed for sale with a real estate agent until approximately two and a half years after the deceased passed away. In this case, there has been no challenge to the will, the estate was not complex, there were no unforeseen or serious personal circumstances that prevented the sale, and the delay in selling the property is not due to circumstances beyond the beneficiary or trustee's control. While we appreciate your circumstances, the hope for a high price for the property is of a different nature to the situations in which the Commissioner can exercise his discretion. Having considered the relevant circumstances, the Commissioner will not exercise his discretion and extend the two year time limit.

Relevant facts: You are a beneficiary of a deceased estate. | The estate included the family home. The family home was transferred to the beneficiaries shortly after the death of the deceased. | The property was subject to a contract of sale several years before the deceased passed away; however it was nullified when the financing was withdrawn. | The beneficiaries leased the property while seeking a buyer in the price range similar to the previous contract but were unable to attract offers. | Approximately two and a half years after the deceased passed away, the beneficiaries reached an agreement to list the property and it subsequently sold.