Private ruling: CGT - deceased estate - 2 year discretion
Date of advice: 8 June 2018
Published: August 2018
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

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 until the requested date? | A1: Yes

Relevant facts and circumstances: The deceased and their spouse purchased the property as joint tenants prior to 20 September 1985. The deceased spouse passed away December 20XX. The property was the deceased’s main residence until the deceased moved into residential aged care. The deceased made a choice to treat the dwelling as their main residence during their absence. The deceased died in March 20XX. At the time of the deceased’s death, the dwelling was rented to an unrelated third party. Probate was received in July 20XX. The property was marketed for sale on the Dec XX. Settlement occurred on April 20XX.

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 | Income Tax Assessment Act 1997 subsection 118-195(1) | Income Tax Assessment Act 1997 subsection 118-190(4)

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows a trustee 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 Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the will is challenged). There must not be any other factors mitigating against exercising it. In your case, the delay in disposing of the dwelling was caused by an unexpected delay in the settlement of the dwelling for reasons outside the beneficiary or trustee’s control and this delay prevented you from disposing of the dwelling within the two year time limit. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.