Private ruling: CGT – deceased estate – Commissioner’s discretion to extend the two year period – main residence exemption
Date of advice: 3 August 2017
Published: November 2017
Ruling period: Year ended 30 June 201D.
Date scheme commenced: 1 July 201C.

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 until settlement? | A1: Yes.

Relevant facts and circumstances: The deceased acquired a dwelling (the dwelling). The dwelling was the deceased’s main residence. The deceased passed away in 201A. The deceased’s three children resided with their parent at the time of their death. Probate was granted early 201B. The dwelling was left to the deceased’s X children, in equal share. There was an ongoing legal dispute amongst the beneficiaries and the Executor of the Estate regarding the administration of the Estate, with beneficiaries being unable to reach a consensus about their respective inheritances under the terms of the will, whether the dwelling should be sold, and if so for what amount. This prevented the dwelling being sold within two years from the deceased’s death. The dispute was resolved and a terms of settlement signed by all beneficiaries and the Executor in 201C. Work was carried out to bring the property to a state ready for auction and it was placed on the market in early 201D. The dwelling was sold at auction in 201D. Settlement occurred in 201D.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 118-130(3) | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision: Summary: The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time until the relevant date. | Detailed Reasoning - Detailed reasoning: The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person’s estate sell that dwelling within two years of the date of death. Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was: ● Acquired by the deceased before 20 September 1985, or ● The deceased’s main residence when they died. The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the will is challenged). There must not be any other factors mitigating against exercising it. In your case, the delay in disposing of the dwelling was due to the will of the deceased being challenged. This delay prevented you from disposing of the dwelling within the two year time limit. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.