Private ruling: Capital Gains Tax
Published: July 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer: | Will the Commissioner exercise his discretion to extend the 2 year period under section 118-195 of the Income Tax Assessment Act 1997 for a property? | Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The deceased died more than 2 years ago. The property was for sale 1 month prior to the deceased's death as they went into a care facility. The property has never been rented out. The property remained vacant until it was sold. The property was for sale with the retirement village agents and an offer was made and fell through. The property was then listed with another agency for about 2 years and was not sold. The property was then listed again with the retirement village agency and sold quickly. Both agencies advertised the property widely.

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

Reasons for decision: Summary: Subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that if 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, then you are exempt from tax on any capital gain made on the disposal of the property acquired by the deceased after 20 September 1985 if: • the property was the deceased's main residence just prior to their death • it was not being used to produce assessable income at this time, and • Your ownership interest ends within 2 years of the deceased's death. You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed). The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion to extend the time period in which you can dispose of the property: • 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 In determining whether or not to grant an extension the Commissioner is expected to consider whether, and to what extent, the dwelling is used to produce assessable income and how long the trustee or beneficiary held it. In your case, there was a delay in selling the property due to an offer falling through and little interest in the property. The property was never rented out and was vacant and for sale at all times from one month prior to the deceased's death up until it was sold. The Commissioner will exercise his discretion to extend the 2 year time limit to the settlement date as the circumstances relating to the delay in the sale of the property was beyond the executors control. Accordingly, the sale of will be exempt from CGT pursuant to section 118-115 of the ITAA 1997.

Reasons for decision A capital gain or capital loss is made as a result of a capital gains tax (CGT) event happening to a CGT asset (section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997)). The most common CGT event is CGT event A1 the disposal of a CGT asset.