Private ruling: Capital Gains Tax - Deceased Estates
Published: April 2015
Ruling period: Year ending 30 June 2015. | Year ending 30 June 2016. | Year ending 30 June 2017.
Date scheme commenced: 1 July 20XX.

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 in the relevant financial year. The Deceased acquired their 'ownership interest' in the Dwelling on or after 20 September 1985. The Dwelling was the Deceased's main residence and has not been used for the purpose of producing assessable income at any time during ownership or since death. The Will of the Deceased is being challenged by various parties. The parties are currently addressing their respective issues via their legal representatives and are attempting to solve their issues through mediation rather than through legal proceedings. Probate has not been sought pending resolution of these issues. However, the paperwork is being readied now to minimise further delays. The Dwelling has remained vacant since the death of the Deceased and this will remain the case until the Dwelling is sold.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows a trustee or beneficiary of a deceased estate to disregard a capital gain or loss from a dwelling 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). The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion: • 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 (eg 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 reasons outside the beneficiary or trustee's control. In this case, the will is being challenged by various parties. The parties are currently addressing their respective issues via their legal representatives and are attempting to solve their issues through mediation rather than through legal proceedings. Attempts to resolve the matters are still underway, and the property will be sold immediately after the issues are agreed upon and probate has been granted. Having considered the particular circumstances of this case, 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.