Private ruling: Capital gains tax – deceased estate – Commissioner’s discretion to extend the two year period – main residence exemption
Date of advice: 9 December 2016
Published: January 2017
Ruling period: Year ended 30 June 2017.
Date scheme commenced: 1 July 2016.

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 until settlement? | A1: Yes.


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 14 November 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, the delay in disposing of the dwelling was due to the will of the deceased being challenged. This delay 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.

Relevant facts: The deceased acquired a dwelling in before 20 September 1985 (the dwelling). | The deceased passed away in 2014 (the deceased). | The dwelling was the deceased’s main residence. | The dwelling has not been used to produce assessable income. | The deceased’s will made provision for a number of beneficiaries including (‘A’). | ‘A’ lodged a caveat in 2014 against the estate opposing the grant of probate or letters of administration. | ‘A’ lodged a further caveat in 2015 against the estate opposing the grant of probate or letters of administration. | The Equity division in the relevant state determined that the deceased’s will which was the subject of the caveats was valid and that probate could be granted. | ‘A’ commenced separate proceedings in relation to a family provision order. These proceedings are being defended by the estate. | The legal impediments have prevented the estate from placing the dwelling on the market. | The dwelling required significant clearing and some repairs prior to sale. | The dwelling was vacant from the date of death of the deceased. | The dwelling was listed for sale in 2016. | The dwelling was listed for sale by auction a short time later. | Settlement occurred in 2016.