Private ruling: Request for Commissioner's discretion
Date of advice: 15 March 2016
Published: May 2016
Ruling period: Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion provided under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the two-year main residence exemption period until the settlement date of the property? | A1: Yes.

Relevant facts and circumstances: The deceased passed away in 20XX. You and your sibling jointly inherited the deceased's home on the date of their death. The property was always the deceased's main residence and income was never derived from the property. You and your sibling intended to sell the property within two years of the deceased's passing. During this period, personal circumstances arose which delayed the sale of the home. The property was placed with an agent in late 20XX. The property was auctioned in early 20XX but was passed in. You entered into a contract to sell the property in 20XX with settlement occurring outside the two year main residence exemption period.

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 if 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, you advise that the property was the deceased's main residence until they passed away in 20XX. The property was not sold within the two year main residence exemption period. You will be only be able to disregard the capital gain from the sale of the post CGT interest of the property if the Commissioner extends the two 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 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 until the settlement date of the property.