Private ruling: Commissioner’s discretion to extend the two year time limit to dispose of a dwelling
Date of advice: 10 August 2018
Published: October 2018
Ruling period: Year ended 30 June 2019
Date scheme commenced: 1 July 2018

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 a dwelling (The dwelling). The deceased passed away in 2015 (The deceased). The dwelling was the deceased’s main residence. The dwelling was prepared for sale and a contract for sale was entered into in 2016 with a developer. The contract included a put and call option of 15 months with an option to extend for a further three months if the developer had not obtained a developer approval by the agreed date. The local council had not granted the approval by the period and the option to extend the period was exercised. Contracts for sale were exchanged in 2018 with settlement due a short time later in 2018. The purchaser was experiencing cash flow problems and a number of further extensions were requested. Settlement subsequently took place after a period of time in 2018.

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. | 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, the delay in disposing of the dwelling was caused by settlement of a contract of sale over the dwelling unexpectedly being delayed for reasons outside the beneficiary or trustee’s control and these delays prevented you from disposing of the dwelling within the two year time limit. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.