Private ruling: Commissioners discretion to extend CGT exemption
Date of advice: 17 August 2016
Published: September 2016
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion under Section 118-195 of the Income Tax Assessment Act 1997 and allow for an extension of time to the two year period? | A1: No.

Relevant facts and circumstances: The deceased died in 20XX. The deceased purchased a pre-cgt (the property). The property was the deceased's main residence. The deceased child (the executor) was appointed executor and trustee. Probate of the will was granted dd/mm/yyyy. The deceased's child (the child) lived at the property after the deceased's death. The deceased's will does not give any family members a right to occupy the property. The executor made attempts to request the child leave the property but the child refused and was abusive and threatening to the executor. In 20XX the executor appointed an agent to sell the property. In 20XX the executor's solicitor sent a formal letter to the child requesting to clean up the property for sale. The executor and the child agreed for the child to live at the property until sale. The child reneged on the agreement to move out of the property and the sale of the property didn't proceed. In 20XX the executor sustained a significant injury. The child continued to live in the property until death in 20XX. The contract for the sale of the property was signed and settled in 20XX.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 118-195(1) | Income Tax Assessment Act 1997 Section 118-200

Reasons for decision: Summary: Subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you own a dwelling in your capacity as trustee of a deceased estate (or it passed to you as a beneficiary of an 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 before 20 September 1985, or • the property was acquired by the deceased on or after 20 September 1985 and the dwelling 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, and • your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). You will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the 2 year time period. 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 Application to your circumstances In this case, there has been no challenge to the will, the estate was not complex, there were no unforseen or serious personal circumstances that prevented the sale, and the delay in selling the property is not due to circumstances beyond the beneficiary or trustee's control. In your situation there was significant a delay of over two years between probate and the property being put on the market. The child continued to reside in the property from the deceased's time of death until their own death. Where someone lives in the property that is not expressly provided for in the will, the Commissioner would not usually exercise discretion and extend the period. While we can appreciate your circumstance, the Commissioner is unable to exercise discretion and extend the two year time limit. Additional note: The Commissioner only has the power to apply discretion in limited circumstances. While we can appreciate your situation, the fact of the matter remains that it does not meet the requirements of the legislation and the Commissioner does not have any power in this case to apply his discretion.