Private ruling: Capital gains tax - Deceased estate - extension of two year rule - disposal
Published: April 2013
Ruling period: Year ended 30 June 2014
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: No.


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

Reasons for decision: Summary: As per subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997), a capital gain or capital loss you make from a capital gains tax (CGT) event that happens in relation to a dwelling, or your ownership interest in it, is disregarded if: (a) you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and (b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied. | Detailed Reasoning - And also one of these items: 1 the deceased *acquired the *ownership interest 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 your *ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner ........... 2 the deceased *acquired the *ownership interest before 20 September 1985 the *dwelling was, from the deceased's death until your *ownership interest ends, the main residence of one or more of: (a) the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or (b) an individual who had a right to occupy the dwelling under the deceased's will; or (c) if the *CGT event was brought about by the individual to whom the *ownership interest *passed as a beneficiary - that individual In this case, when the deceased passed away, the property passed to the executors of the estate. The two year time period to dispose of the property will expire in the relevant year. Therefore, you will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the time period. The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion to extend the time period in which you can dispose of the property: · 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 determining whether or not to grant an extension the Commissioner is expected to consider whether, and to what extent, the dwelling is used to produce assessable income and how long the trustee or beneficiary held it. In this case, the delay was caused by the personal circumstances of a beneficiary of the deceased's estate. This prevented the executor from attending to the sale of the property within the two year time limit. Having considered the relevant facts, the Commissioner is not able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit. As a result of not extending the two year time limit, you will not satisfy any of the conditions contained in section 118-195 of the ITAA 1997. Accordingly, you can not disregard any capital gain or loss that arises as a result of the disposal of the property.

The deceased passed away after 20 September 1985. | The deceased owned a property. | Probate of the will was granted after 20 September 1985. | The deceased left their property to several beneficiaries. | One of the beneficiaries of the estate has experienced health difficulties which has prevented them attending to selling the property. | The difficulties include complications resulting from an illness to a beneficiary's child. | The property has been left vacant and has not been used to produce income. | The property will be sold and settlement will occur more than two years after the death of the deceased.