Private ruling: Capital gains tax
Date of advice: 10 May 2019
Published: June 2019
Ruling period: Year ending 30 June XX
Date scheme commenced: 1 July XX

Ruling: Q1: Will the Commissioner exercise the discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 and allow an extension of the two-year period within which the property that was the main residence of the taxpayer before their death must be disposed of? | A1: Yes. Considering the extenuating circumstances and the relevant factors provided, the Commissioner will exercise the discretion and allow an extension of the two-year period. Further information about extensions to the two-year ownership period can be found on our website ato.gov.au by searching QC52250 in the search bar.

Relevant facts and circumstances: The deceased passed away in 20XX. The deceased and the deceased’s late spouse purchased a dwelling (property) before 20 September 1985 as joint tenants. The property was their main residence the whole of the ownership period until the time of death of the deceased. The deceased had Australian and international citizenship and was an Australian resident for tax purposes. The deceased had no children and no relatives living in Australia. The deceased did not own any other property except the dwelling that was their main residence. The deceased left Australia in 20XX. While away, the deceased arranged for the property to be monitored by Z. The deceased passed away while overseas. The Will of the deceased named X and Y as executors and beneficiaries of the Estate. Due to the complexities of administering the estate overseas, this took considerable time to obtain the death certificate and obtain probate. Probate was granted in 20XX. In 20XX the property was transferred to the executors of the deceased estate. Y intended to travel to Australia as soon as possible to place the property up for sale, but due to circumstances beyond their control this was delayed. In 20XX, Z the minder of the property asked Y to consider allowing some friends to stay in the property for two weeks rent free. Y had allowed this considering that Z had a good relationship with the deceased. Before the two-week period expired, Z contacted Y again saying that the friends needed to stay a bit longer and that they would pay rent. Y had no control of the situation and reluctantly agreed based on the promise of Z that those people would vacate the property shortly. Due to circumstances out of Y’s control, Z’s friends refused to vacate the property and this continued for many months. Y sought help to have the unwanted tenants evicted in 20XX. The property left in disrepair and this took time for the executors to clean and repair the property to bring it to a saleable condition. Once the property was ready for sale, it was placed on the market and settlement occurred in 20XX. The property was sold for $XX. Despite the Estate received rent from the unwanted tenants, the costs of repair and additional expenses which the Estate had to pay were more than the amount of rent received. It is noted the property was rented for less than six years.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | section 118-145 | section 118-195 | subsection 118-195(1)