Private ruling: CGT - deceased estate - main residence
Date of advice: 11 November 2015
Published: November 2015
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise his/her 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


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

Reasons for decision: Summary: The Commissioner will exercise the discretion to extend the two year time period for the disposal of the dwelling under subsections 118-195(1) of the ITAA 1997 until the date of sale of the property. | Detailed Reasoning - Detailed reasoning: Tax Laws Amendment (2011 Measures No. 9) Act 2012, which received Royal Assent on 21 March 2012, gives the Commissioner discretion to extend the time period in subsection 118-195(1) of the ITAA 1997, where the trustee or beneficiary of a deceased estate's ownership interest ends after two years from the deceased's death. Subsection 118-195(1) of the ITAA 1997 provides that if the deceased died on or after 20 September 1985 and had acquired the dwelling on or after 20 September 1985 and you have an ownership interest in a dwelling that passed to you as a beneficiary in a deceased estate, or you have owned it as trustee of a deceased estate, you disregard any capital gain or capital loss you make from a capital gains tax (CGT) event that happens to the dwelling if the following applies: • you disposed of your ownership interest within two years of the deceased's death (or a longer period allowed by the Commissioner), and • just before the deceased's death: • the dwelling was their main residence; and • it was not then being used to produce assessable income. The Commissioner would be expected to exercise 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 your case, the deceased resided in the property until his/her death and the property was not being used to produce assessable income at that time. There was a delay in locating the deceased's will and locating the nominated executors. You were able to sell the dwelling with the settlement in 20XX. The difficulty in locating the will and sorting out the issues regarding the executors interfered with your ability to dispose of the property within the two-year time period in order to take advantage of the CGT main residence exemption that is generally available for trustees of deceased estates. The Commissioner takes into account for how long the trustee held the ownership interest in the dwelling. In your case, it is considered that you have supplied a reasonable explanation for the delay in the disposal of the dwelling, and therefor the Commissioner will exercise his discretion to extend the two year time period until the date of settlement of the property.

Relevant facts: The deceased owned a property that had been acquired after 20 September 1985. The deceased lived at the property until his/her death and at no time has the property been used for income producing activities. | The deceased had a valid will at the time of his/her death. | There was difficulty in locating the will and locating the nominated executors. The nominated executors declined to act in this role and a replacement executor was appointed. | In 20XX probate was granted by the Supreme Court. | The property was sold and the settlement was in 20XX.