Private ruling: Capital gains tax
Published: November 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Question and answer | Will the Commissioner exercise his discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) in your particular circumstance? | Yes.

Relevant facts and circumstances: Your parent passed away unexpectedly. Your parent had lived in the family home (the dwelling) for many years. The dwelling was originally purchased prior to 20 September 1985. The dwelling was your parent's main residence. The property was never used to produce assessable income. The dwelling was disposed of over two years after your parent's death. You were a beneficiary of your parent's s estate. The period following your parent's death was a very stressful time for you and your siblings. You found it difficult to go to the dwelling following your parent's death. Your siblings had health issues at the time which impeded their ability to attend to the dwelling. You received advice from a real estate agent that you needed to complete various renovations to improve the dwelling ready for sale. The local property market had dropped dramatically by the time you placed the dwelling on the market. The dwelling was placed on the market within two years of your parent's death; however, it took several months to sell which placed it over the two year period.

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

Reasons for decision: Summary: Under section 118-195 of the ITAA 1997, a capital gain or loss you make from a CGT event that happens in relation to a dwelling or your ownership interest in it is disregarded if: a) you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; b) the deceased acquired the ownership interest before 20 September 1985, or if the ownership interest was acquired on or after this date, the dwelling was the deceased's main residence just before the deceased's death and was then not being used for the purpose of producing assessable income; and c) your ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner. As stated above, the Commissioner has the discretion to allow a longer period than two years for an ownership interest in the dwelling to end where: · the ownership of a dwelling or 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 unforseen 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 for sale over the dwelling is unexpectedly delayed or falls through or circumstances outside the beneficiary or trustee's control. In your situation, you acquired an interest in a dwelling as a beneficiary of a deceased estate, and the dwelling was the deceased's main residence just prior to his death and has never been used to produce assessable income. However, the dwelling was not disposed of within two years of your parent's death, due in part to you and your siblings' personal and medical related issues that arose after their death. These issues are considered to be serious and unforseen personal circumstances. Accordingly, you meet the criteria in which the Commissioner may exercise his discretion to extend the two-year period in which a deceased's dwelling must be disposed of. The Commissioner considers that it is appropriate to exercise his discretion on this occasion to extend the two-year period to the date the dwelling was disposed of.