Private ruling: Capital gains tax - deceased estate - Commissioner's discretion to extend the two year period - main residence exemption
Date of advice: 20 September 2016
Published: November 2016
Ruling period: Income year ended 30 June 20ZZ.
Date scheme commenced: July 20YY.

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 purchased the dwelling in July 20UU. The dwelling was their main residence for the full period of their ownership. The deceased's sibling was appointed Power of Attorney in relation to the deceased's affairs in early 20WW. The deceased's sibling was diagnosed with a serious illness in late 20VV. The sibling's treatment for this condition was completed in around the time that the deceased became ill. The deceased passed away in late 20WW. When the deceased passed away, their sibling was appointed executor and beneficiary of his estate. In late 20XX the executor suffered a fall and incurred serious injuries. The executor was incapacitated by these injuries for approximately six months, and is still receiving treatment for some injuries. The dwelling had been neglected by the deceased. The unit and its garage were used as storage for paperwork related to the deceased's business. The administration of the deceased's estate was complicated by the physical state of the dwelling and their business premises. The dwelling has now been cleared and the sale of the property is to be settled in late 20YY.

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 a specific 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. The delay in disposing of the dwelling was due to the executor being unable to attend to the deceased estate due to serious personal circumstances arising during the two year period. At the time the deceased became ill, the executor was recovering from a serious illness. The executor then suffered a fall in 20XX which resulted in various injuries. The executor was incapacitated by these injuries for approximately six months, and is receiving ongoing treatment for some injuries. The deceased's dwelling was left in an inhabitable state which required the physical removal of paperwork relating to the deceased business, as well as general litter before the property could be offered for sale. The Commissioner accepts that it is appropriate to grant the short extension that you have requested until a specific date.