Private ruling: Capital Gains Tax
Date of advice: 6 March 2017
Published: August 2017
Ruling period: Year ending 30 June 2012
Date scheme commenced: 01 July 2011

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and extend the 2 year period? | A1: Yes.

Relevant facts and circumstances: The deceased passed away on a specific date. The property was their main residence for the entire ownership period. The property was never used for income producing purposes. On their passing an Executor of the estate was appointed. Their solicitor was also an Executor but later renounced this role as joint Executor prior to Probate being obtained. The now sole Executor and Beneficiary, was diagnosed with an illness during the initial two year period of administration of the Estate. This lead to the delay in Probate, which was granted. Issues with the property identified by The Council delayed the arrangement for sale. The property was sold. The Executor and Beneficiary passed away. The Property settled.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 states 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 ● deceased acquired dwelling after 20 September 1985 and it was their main residence just prior to death ● Your ownership interest ends within 2 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 purchased by the deceased but was not sold within 2 years of the deceased's date of death. The Estate will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the 2 year time period. 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 the beneficiary and Executor of the Estate, contracted an illness and subsequently died. Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time.