Private ruling: CGT - main residence - deceased estate
Date of advice: 24 May 2017
Published: September 2017
Ruling period: Year ending 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? | A1: Yes.

Relevant facts and circumstances: The deceased passed away. The deceased acquired the property and it was their main residence. The property was not used to produce assessable income. The deceased's children challenged the Will. The court proceedings were prolonged and difficult. A writ of possession had to be issued as a resident of the property refused to vacate it to facilitate the sale. The property was sold at auction outside the two year time limit.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195.

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 states that if you are an individual who owns a dwelling in a capacity as trustee of a deceased 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 on or after 20 September 1985 and the property 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; or the property was acquired by the deceased before 20 September 1985; and ● your ownership interest ends within two years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). In your case, the property has not been sold within the two year time limit. Therefore, you will only be able to disregard the capital gain from the sale of the property if the Commissioner grants an extension to the two year time limit. 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. In your case, the delay in the disposal of the property was due to the complexities incurred in administering the estate. Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit.