Private ruling: Capital gains tax – deceased estate – Commissioner’s discretion
Date of advice: 19 December 2017
Published: May 2018
Ruling period: Year ended 30 June 201D.
Date scheme commenced: 1 July 201C.

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: Z acquired a dwelling after 20 September 1985 (the dwelling). Z passed away in 201A (the deceased). The dwelling was the deceased’s main residence and was not used to produce assessable income. The deceased passed away without a will. The Public Trustee took over the administration of the deceased’s estate in 201A and in early 201B instructed an external consultant to undertake a genealogical study and locate ancestors of the deceased residing overseas. A Certificate of Entitlement was signed and issued by the external genealogical consultant. The Public Trustee was appointed executor of the deceased’s estate in 201C. Letters of administration were granted by the court in 201C. A real estate agent was instructed to sell the deceased’s dwelling in 201C. The dwelling was auctioned in 201C and settlement of the sale of the dwelling occurred in early 201D.

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. | 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. ● The administration of the deceased’s estate was delayed due to the deceased passing away without a will. ● As the deceased did not have any family residing in Australia, the administration of the deceased’s estate was transferred to the Public Trustee within 2 months of the deceased’s passing. ● The Public Trustee engaged a specialist genealogical consultant to locate the deceased’s ancestors living overseas in early 201B and a certificate of entitlement was provided. ● The Public Trustee was appointed executor of the deceased’s estate and letters of administration were granted by the court in 201C. ● The deceased’s dwelling was marketed for sale within a month of the letters of administration being granted. ● Settlement of the sale of the main residence of the deceased occurred within X years, X months from the date of the deceased’s passing. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.