Private ruling: CGT - deceased estate - 2 year discretion
Date of advice: 25 September 2015
Published: September 2015
Ruling period: Year ended 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1July 2014

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 to dispose of the property? | A1: Yes.

Relevant facts and circumstances: You are the beneficiary of a deceased estate. One of the assets of the deceased estate was the deceased's main residence. The property was acquired by the deceased after 19 September 1985 and it became their main residence. The deceased later moved into an aged care facility and the property was rented out. The deceased made the choice under the absence rule (contained in section 118-145 of the ITAA 1997) to continue to treat the property as their main residence up until the time of their death which was within six years of them moving out of the property. The executor of the deceased estate transferred the property to you within a year of the date of death however, your attempted sale of the property was delayed because of circumstances outside of your control. These circumstances were resolved and the sale contract was exchanged within three years of the date of death. Settlement has now been completed.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows a trustee of a deceased estate to disregard a capital gain or loss from a dwelling if: • 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 (eg 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, you attempted to sell the property however, due to circumstances beyond your control there was a significant delay. You disposed of the property as soon as was practicable once those issues were resolved. Having considered the particular circumstances of this case, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit.