Private ruling: Capital gains tax - deceased estate
Published: October 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Will the Commissioner exercise his discretion to allow you to disregard any capital gain or capital loss you make from the disposal of your share of an inherited property under section 118-195 of the Income Tax Assessment Act 1997 ? | Yes.

Relevant facts and circumstances: The deceased passed away in 20XX. You are the beneficiaries of the deceased's estate. The estate includes a property that was the deceased's main residence prior to their death. Due to the complexity of the estate, the transfer of the property from the trustee to the beneficiaries did not occur until 20YY. The property has been listed for sale since shortly after the transfer occurred. The property is being listed for sale at market value. The property will be sold by 30 June 20ZZ. The property has not been rented at any time since the deceased's death.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195.

Reasons for decision: Summary: When a person inherits a deceased person's dwelling, they may be exempt or partially exempt when a capital gains tax (CGT) event happens to it (for example, they sell it). Where the dwelling is sold within two years of the deceased's death, the trustee or beneficiary can disregard the capital gain or capital loss resulting from the sale. A trustee or beneficiary of a deceased estate may apply to the Commissioner to grant an extension of the two year time period, where the CGT event happens in the 2008-09 income year or later income years. Generally, the Commissioner would exercise the discretion in situations where the delay is due to circumstances which are outside of the control of the beneficiary or trustee, for example: · 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 exercising the discretion the Commissioner will also take into account whether and to what extent the dwelling is used to produce assessable income and for how long the trustee or beneficiary held the ownership interest in the dwelling. Taking into consideration the specific circumstances of your case, the Commissioner has decided to exercise his discretion to grant an extension of the two year period, provided that the property is sold by 30 June 20ZZ.