Private ruling: Capital gains tax - extending two year time period
Date of advice: 22 May 2017
Published: September 2017
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Will the Commissioner exercise the discretion under section 118-195 of the Income Tax Assessment Act 1997 and extend the two year time period? | A1: Yes

Relevant facts and circumstances: The deceased passed away in 201X. The beneficiaries of deceased's estate were his/her three children. Another member of the deceased's family passed away in 201Y. The beneficiaries and other family attend to the deceased's home and the property was put up for sale in late 201Y. The property remains unsold.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision: Summary: Generally, capital gains tax (CGT) event A1 happens when you dispose of a CGT asset, as established in Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997). Subsection 118-195(1) of the 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 two 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 two year time period (until settlement date). The Commissioner can exercise his discretion in situations such as where: ● 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). | Detailed Reasoning - Application to your circumstances: In your case, the property was purchased by the deceased and was their main residence until they passed away. The property is presently on the market and has not sold within the two years of the deceased's date of death. The delay was caused by circumstances outside the beneficiaries control due to attending to personal and other family responsibilities. Having considered your personal circumstances, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time until DDMMYY.