Private ruling: Capital gains tax - deceased estate - Commissioner's discretion - two year period
Date of advice: 15 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2016.
Date scheme commenced: 1 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 acquired the property as a main residence. The deceased passed away in 20XX. The main beneficiaries are the deceased's three children. Two of the beneficiaries were named joint executors. In 20XX the joint executors applied for probate however the third beneficiaries engaged a solicitor and expressed concern with the sale of the property. Further delays occurred in obtaining information from the third beneficiary's solicitor. This was further compounded due to the estranged relationship between the executor's and the third beneficiary. Under a codicil to the Will, the joint executors obtained a grant of probate around month 20YY. The property sold at auction on and settled over two years after the passing of the deceased.

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 22 April 2016. | 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, significant delays were caused by the lack of communication between the joint executors and the third beneficiary, which resulted in a delay of placing the property on the market. The property sold at auction on dd/mm/yyyy with settlement occurring on dd/mm/yyyy, being over two years after the passing of the deceased. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.