Private ruling: Deceased estate capital gains tax
Date of advice: 8 September 2016
Published: October 2016
Ruling period: Year ending 30 June 3016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2015

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 ('ITAA 1997') in relation to the dwelling on the property and allow an extension of time until 30 June 2017? | A1: Yes

Relevant facts and circumstances: The deceased died on dd/mm/yyyy. The deceased had a will at the time of death, which was contested in the Supreme Court in mm/yyyy. An asset in the estate dealt with by the will was the deceased's main residence ('the property'). The property was purchased 19XX. The court case settled in 20XX. The property was listed for sale in mm/yyyy and the contract of sale settled in mm/yyyy. The property was not used to produce assessable income at any time.

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 • the property was acquired by the deceased on 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, and • your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). In this case, the property was purchased by the deceased after 20 September 1985 and was their main residence until they passed away on dd/mm/yyyy. The property was not sold within 2 years of the deceased's date of death. You 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 The property was subject to the deceased's will, which was contested in the Supreme Court. When this case was settled, the property was listed for sale and subsequently sold on dd/mm/yyyy. 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.