Private ruling: Capital Gains Tax - deceased estate
Published: August 2017
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(1)(b) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the two-year limit to disregard a capital gain on the sale of the deceased taxpayers main residence. Answer Yes

Relevant facts and circumstances: A person passed away. The property was their primary place of residence. The property has not been used to produce income at any time after the deceased's date of death and has remained empty. An informal hand written Will was left setting out the distribution of the deceased estate. A 30 day waiting period was allowed after the death of the individual, as there were only two potential beneficiaries the deceased's siblings, if it was decided the individual died intestate. One of the beneficiaries died. Advice from solicitors was followed to have a determination of the Will by the Courts. The determination occurred. Administration was granted. As a Legal Personal Representative the property was transferred. Minor repairs were instigated to ready the property for sale; on the whole these were completed by the administrator. The house was listed for sale, due to a depressed housing market a contract of sale was realised. Settlement occurred.

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: 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 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 property was purchased by the deceased after 20 September 1985 and 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.