Private ruling: Deceased estate main residence exemption
Date of advice: 6 July 2018
Published: September 2018
Ruling period: Year ending 30 June 2018.
Date scheme commenced: DDMMYY

Ruling: Q1: Are you eligible for an exemption under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. | Q2: Will the Commissioner exercise his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time for the disposal of your ownership interest in the Property? | A2: No.

Relevant facts and circumstances: The Deceased purchased the Property after 20 September 1985. The Property was the Deceased’s main residence. The Property is X hectares in size. The Deceased passed away. Probate was granted and the ownership interest was transferred to you, and your other two siblings. Your sibling1 and their children resided at the Property for a period prior to the Deceased’s death. It was verbally agreed by you and your siblings that your sibling1, who was pregnant at the time and their children would remain at the Property, you believed this was what the Deceased would have wanted and all siblings were in agreeance with the decision. Your sibling1 did not have a right to occupy under the Deceased’s Will or outside of the Will. Your sibling1 and their children continued to reside at the Property until the Property was sold. You and your siblings entered into a contract to sell the property, settlement was reached.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 118-195

Reasons for decision: Detailed Reasoning - Detailed reasoning: Subsection 118-195(1) of the ITAA 1997 allows for Capital Gains Tax to be disregarded where the deceased acquired the property before 20 September 1985, and one of the following criteria is met: ● Your ownership interest ends within two years of the deceased’s death, or ● The property was the main residence for one of the following from the deceased’s death until your ownership interest in the property ended: ● The spouse of the deceased, or ● An individual with the right to occupy under the deceased’s Will, or ● Yourself When Subsection 118-195(1) of the ITAA 1997 is applied to your specific circumstances, your ownership interest did not end within two years of the deceased’s death. Additionally, the property was not occupied by you, the spouse of the deceased or an individual with the right to occupy from the deceased’s death until your ownership interest in the Property ended. | Detailed Reasoning - Detailed reasoning: You have asked for the Commissioner’s discretion to extend the two year period. Under Subsection 118-195(1) of the ITAA 1997, the Commissioner can allow a longer period of time if the delay of sale is due to circumstances outside of your control, including but not limited to: ● 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) ● settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary's or trustee’s control You have not advised us of any circumstances or relevant factors which would have delayed the sale of the Property or your occupancy of the property. The Commissioner also considers that the Property was used for several years to as a main residence for your sibling1 after probate was granted, however they did not have the right to occupy the Property under section 118-195 of the ITAA 1997. Having considered your circumstances and the relevant factors, the Commissioner is unable to apply his discretion and cannot allow an extension of time under subsection 118-195(1) of the ITAA 1997 for your ownership interest in the Property.