Private ruling: Main residence exemption
Date of advice: 21 June 2016
Published: August 2016
Ruling period: Year ending 30 June 2016
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) and allow an extension of time to the two year period? | A1: Yes.

Relevant facts and circumstances: The deceased lived in a property with Person X until the deceased's death. The deceased's will, bequeathed the property equally to their relatives. The deceased's will, provided Person X with a life interest in the property Person X passed away more than two years after the deceased. The property was subsequently put on the market for sale. A sale contract was signed and settled within a few months of Person X's death. The property has not been used to produce assessable income.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows a trustee or beneficiary of a deceased estate to disregard a capital gain or loss from a dwelling 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). The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion: • 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 (e.g. 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 reasons outside the beneficiary or trustee's control. In this case, the deceased passed away more than two years prior to the date the property was sold. The deceased's will, provided Person X with a life interest in the property until they passed away. It was not within your control to dispose of the dwelling within a two year period after the deceased's death due to this arrangement. However, the dwelling was disposed of in a timely manner once it was in your control to do so. Having considered the particular circumstances of this case, the Commissioner will apply the discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit to the date of settlement.