Private ruling: Capital gains tax – deceased estate – Commissioner’s discretion to extend the two year period – main residence exemption
Date of advice: 25 January 2018
Published: June 2018
Ruling period: Income year ended 30 June 2017
Date scheme commenced: 1 July 2016

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: Your parent (the deceased) acquired a property (the dwelling) prior to 20 September 1985. The dwelling was the deceased’s main residence. Your sibling moved into the dwelling in 20XX to assist with your parent’s care due to declining health and a series of falls. Your sibling did not pay any rent while caring for your parent. Your parent was admitted to a nursing home in 20XX. Your sibling continued to occupy the dwelling after your parent was admitted to the nursing home, and elected to pay rent to assist with the costs of accommodation. Your sibling paid a nominal amount of rent. Your parent passed away in 20XX. You and your X siblings inherited the dwelling. Title was registered in the names of the beneficiaries in early 20XX. Your sibling resided in the dwelling until mid 20XX. In 20XX you experienced an illness and were diagnosed with a disease. You underwent two procedures in late 20XX. As a result of your health condition, you retired from employment. In late 20XX, your other sibling was diagnosed with serious health conditions. Your other sibling passed away in 20XX. Due to the serious illness affecting yourself and another of the beneficiaries, you and your siblings did not approach a real estate agent to sell the dwelling until 20XX. The agent initially recommended sale by public auction, which required an agency agreement to be circulated and signed by each of the beneficiaries who resided in various locations throughout Australia. Despite numerous open house events prior to auction, the dwelling did not sell due to its poor state of repair. You and your siblings spent a substantial amount of money on improving the dwelling to increase its appeal in relation to other properties on the market in the area. You and your siblings then decided to list the property for sale rather than auction. Eventually an offer was made and accepted by all beneficiaries. The contract of sale was initially sent to the executors of your parent’s will and returned to the agent, which took approximately a week. However, this contract was not acceptable as it needed to be signed by the beneficiaries rather than the executors. An amended contract was then circulated to each of the beneficiaries in their various locations. This process took several weeks. The contract of sale was dated November 20XX. Settlement of the sale took place in February 20XX.

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 118-190 | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision: Summary: 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 delay in disposing of the dwelling was due to you being unable to attend to the deceased estate due to serious personal circumstances arising during the two year period, being the serious illnesses affecting yourself and your sibling after your parent passed away. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.