Private ruling: Capital gains tax - deceased estate - Commissioner's discretion - two year period
Date of advice: 19 May 2016
Published: June 2016
Ruling period: Year ended 30 June 2016.
Date scheme commenced: 1 July 2015.

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 the residential property after 20 September 1985 and it was the deceased's main residence for the whole of their period of ownership. The deceased passed away after 20 September 1985. The deceased estate's solicitors did not transfer the property into your name until around seventeen months after the deceased passed away. You completed some work on the property to get it into a saleable condition prior to it being put on the market. You engaged a real estate agent to sell the property a number of months after it was transferred into your name. You entered into a contract for the sale of the property with settlement occurring around twenty-seven months after the deceased passed away.

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

Reasons for decision: Summary: Commissioner's discretion under Section 118-195 of the ITAA 1997 Subsection 118-195(1) of the ITAA 1997 provides a capital gains tax (CGT) exemption to a beneficiary or trustee of a deceased estate where a CGT event happens to a dwelling (or an ownership interest in a dwelling) acquired from a deceased estate. An exemption is provided where the beneficiary or trustee's ownership interest in the dwelling ends within two years of the deceased's death and just before the deceased's death (for pre-CGT dwellings) the dwelling was their main residence. The Commissioner has discretion to extend the two year time period in subsection 118-195(1) of the ITAA 1997 where the trustee or beneficiary of a deceased estate's ownership interest ends after two years from the deceased's death. This discretion may be exercised in situations such as where: 1. the ownership of a dwelling or a will is challenged; 2. the complexity of a deceased estate delays the completion of administration of the estate; 3. 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 4. 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 property was not transferred into your name until around seventeen months after the deceased had passed away. Once the property had been transferred to you, you took the necessary steps to put the property is a saleable condition, with the property being put on the market a few months after it had been transferred to you. Settlement on the disposal of the property occurred just after the 2 years from when the deceased passed away. Having considered the relevant facts, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit to the settlement date.