Private ruling: Capital gains tax
Date of advice: 11 January 2018
Published: May 2018
Ruling period: 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997, (ITAA 1997) on the disposal of a different asset? | A1: No

Relevant facts and circumstances: Your relative purchased a dwelling (property) before XX/XX/XXXX. This dwelling was their main residence and they lived in this dwelling for as long as possible. Your relative became ill in 20XX and an agent was appointed to manage the assets and affairs of your relative. In 20XX your relative was placed in a nursing home. In 20XX a court order was made giving instructions, relating to the interests and the administration of their estate. In 20XX the agent made the decision to sell the dwelling due to the upkeep of this property. The funds from this disposal were not set aside or placed into a separate account, but were used to purchase different assets. Your relative passed away in 20XX. You and numerous others were named as beneficiaries. In your relatives will, the property was specifically bequeathed to you and one other beneficiary. Probate was granted in 20XX. You received your final distribution in 20XX.

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

Reasons for decision: Summary: Commissioner is unable exercise his discretion to extend the 2 year time limit. | Detailed Reasoning - Basic main residence exemption: A capital gain or capital loss made from a CGT event that happens to a CGT asset that is a dwelling or a taxpayer’s ownership in it is disregarded if: ● the taxpayer is an individual ● the dwelling was the taxpayer’s main residence throughout their ownership ● period, and ● The interest did not pass to the taxpayer as beneficiary in or was not acquired by the taxpayer as trustee of a deceased estate. ● The basic main exemption requirements are contained in section 118-110 of the ITAA 1997. A capital gain or capital loss may only be partially disregarded if the dwelling was: ● not the taxpayer’s main residence throughout their ownership period, or ● used for the purpose of producing assessable income. Any capital gain or loss that arises subsequently may be disregarded if section 118-195 of the ITAA 1997 is satisfied. 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). | Detailed Reasoning - Application to your circumstances: In your case, the property was disposed of and the proceeds from this sale were invested into a number of different assets. Any capital gain or capital loss made from the disposal of this dwelling would have been disregarded at the time this event occurred. The main residence exemption does not apply to this type of asset and we do not need to consider the application of the Commissioner’s discretion under section 118-195 of the ITAA 1997 to extend the two year time limit.