Private ruling: Capital gains tax for a deceased estate
Date of advice: 29 September 2016
Published: November 2016
Ruling period: Year ending 30 June 20ZZ
Date scheme commenced: 1 June 20YY

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 ('ITAA 1997') in relation to the property and allow an extension of time until 30 June 20ZZ? | A1: Yes

Relevant facts and circumstances: The deceased passed away in 20XX. The deceased's main residence ('the property') formed part of the deceased's estate. The property was purchased by the deceased's spouse in 196X. The deceased became the sole owner of the property when the deceased's spouse passed away in 201X. The property was not used to produce assessable income. The executors for the deceased's estate are the deceased's children, they are also beneficiaries under the deceased's will. X provided care to their spouse as they sustained injuries and ongoing health problems resultant from an accident in 20WW. X is caregiver to their children with disabilities.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 states that if you own a dwelling in your capacity as trustee of a deceased estate (or it passed to you as a beneficiary of an estate), then you are exempt from tax on any capital gain made on the disposal of the property 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). You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed). You will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the 2 year time period. The Commissioner can exercise his discretion in situations such as where: • 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 (for example, 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 circumstances outside the beneficiary or trustee's control Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time until 30 June 20ZZ.