Private ruling: CGT – deceased estate – Commissioner’s discretion to extend the two year period
Date of advice: 13 September 2017
Published: January 2018
Ruling period: 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: The deceased acquired a dwelling and surrounding land greater than 2 hectares (the dwelling) The deceased passed away in 2015. (The deceased) The dwelling was the deceased’s main residence. The dwelling has not been used to produce income and has been vacant since the date of death of the deceased. The dwelling was prepared for sale and listed for sale by auction in 2016. The auction took place a short time later and unfortunately no bids were received. The dwelling remained listed for sale. The geographical location of the dwelling and the difficult local market conditions restricted the marketability of the dwelling. A purchaser made an offer which was accepted in 2017. Settlement occurred in 2017.

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 until settlement. 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 Commissioner accepts that it is appropriate to grant the short extension that you have requested. | Detailed Reasoning - Note:: Land adjacent to a dwelling may also qualify for the main residence exemption if it and the dwelling are sold together and both of the following apply: ● during the period you owned it, you used the land mainly for private and domestic purposes in association with the dwelling, and ● the total area of the adjacent land and the land on which the dwelling stands is not more than two hectares (4.94 acres). If the adjacent land is used for private purposes and is greater than two hectares, you can choose which two hectares are exempt. The remainder is subject to CGT. If any part of the land around a dwelling is used to produce income, it is not exempt, even if the total land area is less than two hectares.