Private ruling: Capital gains tax - deceased estate - Commissioners' discretion
Published: May 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Will the Commissioner exercise his discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) in your particular circumstance? | A1: No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Your parent acquired a property which was their main residence. Prior to your parent's death approximately four and half years ago the local council placed a restriction on the property with a heritage listing. The beneficiaries of your parent's estate are you, your siblings in equal shares. One of your siblings has resided with your parent at the property for many years prior to their death. The council valuation of the property is $X. Three years ago you started the process of getting the heritage listing removed from the property. An attempt was made to auction the property but no bids were received. The only offers you received for the property were between $X and $X. The reason the offers were so low was because of the heritage listing which restricts what the purchaser can do to renovate the dwelling. Two years ago the property was valued between $X and $X by a local real estate agent. Early this month, the Minister of Planning approved the new heritage controls, which resulted in the property no longer being included within the Heritage Overlay. The property has been listed with a local real estate agent with an appraisal price of $X to $X. You are requesting an extension of time to dispose of the property for a period of two years from the date the heritage listing was removed. You have supplied a copy of documentation to support your application and this documentation is to be read with and forms part of your application for the purpose of this ruling.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 118-195 | Income Tax Assessment Act 1997 Section 118-195

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. Due to recent changed to section 118-195 of the ITTA 1997, the Commissioner now has discretion to extend the two-year period in the Act where: · the ownership of a dwelling or 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 unforseen 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 for sale over the dwelling is unexpectedly delayed or falls through or circumstances outside the beneficiary or trustee's control. In your case, your parent's dwelling was not disposed of within two years from their death was due to the heritage listing on the property restricting potential purchasers from altering the property which was reflected in the very low offers for purchase received. We acknowledge that the heritage listing on the property may have affected the offers received for it, but it did not prevent you from disposing of the property. Also it appears that the property was not listed with a local real estate agent until a specified date which is more than two years after your parent's date of death. Based on the information you have provided, we believe that you do not meet the criteria in which the Commissioner may exercise his discretion to extend the two-year period in which a deceased's main residence must be disposed of. Therefore, the Commissioner does not consider that it is appropriate to exercise his discretion to extend the two-year period in which a deceased's main residence must be dispose of. The normal capital gains tax (CGT) rules will apply to the disposal of the property. | Detailed Reasoning - CGT: The most common CGT event, CGT event A1 occurs when you dispose of an asset to another entity. The time of the event is when you enter into the contract for sale, if there is no contract - when the change of ownership occurs. You make a capital gain if the capital gain if capital proceeds from the CGT event are more than the asset's cost base. You make a capital loss if your reduced cost base is greater than your capital proceeds. | Detailed Reasoning - Deceased estate - main residence: Special rules apply as the asset was the deceased person's main residence. If you inherit a deceased person's property, you may be exempt or partially exempt when a CGT event occurs to it. For more information on how CGT applies please see the enclosed information. This information has been taken from the Guide to capital gains tax 2011-12 (NAT 4151). Information is also available on our website - www.ato.gov.au.