Private ruling: Capital gains tax – deceased estate – Commissioner’s discretion to extend the two year period – main residence exemption
Date of advice: 11 January 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 acquired an ownership interest in a dwelling (the dwelling). They occupied the dwelling as their main residence. They became unwell and moved in with their relative. The deceased chose to continue to treat the dwelling as their main residence. The dwelling was never rented out. The deceased passed away. The dwelling was made available for sale. A contract for sale was entered into with a proposed settlement date. The purchaser had not settled by the required date. Settlement occurred two years and two weeks after the deceased’s 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. In your submission, you state that the delay in disposing of the dwelling was due to the purchaser not completing settlement by the required date. The settlement was complete two years and two weeks after the deceased’s death. We have taken the facts of your situation into consideration when determining whether the Commissioner’s discretion would be exercised to extend the two year period and allow you to disregard any capital gain or loss made on the disposal of the dwelling under subsection 118-195(1) of the ITAA 1997. We accept the reasons for the delay in the disposal of the deceased’s dwelling was due to the above mentioned issue arising during the two year period after the deceased had passed away. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.