Private ruling: Capital gains tax - deceased estate - Commissioner's decision - two year period
Date of advice: 16 August 2016
Published: September 2016
Ruling period: Year ending 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the dwelling on the property and allow an extension of time. | A1: Yes

Relevant facts and circumstances: Deceased passed away in 20XX. The property was the deceased's principal place of residence The property was jointly acquired prior to 20 September 1985. Sole ownership of the property was acquired post 20 September 1985. The property has been vacant since the date of death. Probate was granted in 20XX. The delay in selling the property was due to the following reasons: • The Will has been challenged which resulted in the delay of the disposal of the assets in the estate.

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

Reasons for decision: Summary: 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 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). 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). In this case, the deceased acquired a 50% interest in the property before 20 September 1985 and the remaining 50% interest was acquired after 20 September 1985 and the property was their main residence until they passed away. The property was not sold within 2 years of the deceased's date of death. You will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the 2 year time period. The Commissioner can exercise his discretion in situations such as where: • 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 Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time.