Private ruling: Capital gains tax - deceased estate - extension of two year period – disposal
Date of advice: 13 March 2018
Published: June 2018
Ruling period: Year ended 30 June 2018.
Date scheme commenced: 1 July 2017.

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 has passed away. The deceased purchased a property in 1992 and it was his main residence until his death. The property was vacant and produced no assessable income from the death of the deceased to the sale of the property. Probate was granted. Due to the remote location it was hard for the executors to attend the property to clean the house and prepare for sale. The property as placed on the market. Only one offer was received for the property in eight months. The purchaser’s requested a delayed settlement as they had difficulties in obtaining finance. The settlement of the property took place two years and two months after his death.

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)

Reasons for decision: Summary: The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time. | Detailed Reasoning - Detailed reasoning: The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person’s estate sell that dwelling within two years of the date of death. Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was: ● Acquired by the deceased before 20 September 1985, or ● The deceased’s main residence when they died. 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. Settlement of the sale of the dwelling occurred two years and two months after the passing of the decease due to:- ● The property was in a remote location which made it difficult for the executors to attend the property and prepare it for sale. ● The property was on the market for eight months and only one offer was received during that period. ● The purchaser requested a delay in settlement while they obtained finance for the property, and this extended the settlement period. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.