Private ruling: Deceased estate - Commissioner's discretion
Published: December 2013
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2013

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: Yes

Relevant facts and circumstances: The deceased passed away in 20XX. The deceased moved into their main residence in 19XX. The deceased left their children as the executors of the estate. There has been delay in administering the estate and sale of the residence due to disagreements between the executors on several issues. The disputes between the executors of the estate are ongoing. The executors have now reached an agreement on the selling agent for the property. It is intended that the property will be placed on the market shortly. You have requested a six month extension of time to dispose of the property.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195. Reasons for decision | Subsection 118-195(1) of the ITAA 1997 states that if you are an individual who owns a dwelling in a capacity as trustee of a deceased 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 on or after 20 September 1985 and the property 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; or the property was acquired by the deceased before 20 September 1985; and | · your ownership interest ends within two years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). | In your case the deceased acquired the property in 19XX. The deceased passed away in 20XX, and the property has not yet been sold. | The property will be sold outside the two year period outlined in subsection 118-195(1) of the ITAA 1997. Therefore, you will only be able to disregard the capital gain from the sale of the property if the Commissioner grants an extension to the two year time limit. | 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 your case, the delay in the disposal of the property was caused by a dispute over the administration of the estate. The property has not yet been sold. | Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit. Accordingly, you will be able to disregard the capital gain that arose as a result of the disposal of the property if the property settles by that date.