Private ruling: Capital gains tax
Published: December 2014
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Will the Commissioner Exercise the 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? | No.

Relevant facts and circumstances: You inherited the property from your parent's estate. Under your parents will you inherited the property when you turned XX. At the time of your parent's death you were not XX years old. The property was held in trust for you until you reached the age of XX by the trustee of your parent's estate. The property was the main residence of the deceased prior to the date of death. The property was rented out from the deceased's death up until it was sold by you. You made a capital gain when the property was sold.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-130. | Income Tax Assessment Act 1997 Section 118-195.

Reasons for decision: Summary: When a person inherits a deceased person's dwelling, they may be exempt or partially exempt when a capital gains tax (CGT) event happens to it (for example, they sell it). Where the dwelling is sold within two years of the deceased's death, the trustee or beneficiary can disregard the capital gain or capital loss resulting from the sale. A trustee or beneficiary of a deceased estate may apply to the Commissioner to grant an extension of the two year time period, where the CGT event happens in the 2008-09 income year or later income years. Generally, the Commissioner would exercise the discretion in situations where the delay is due to circumstances which are outside of the control of the beneficiary or trustee, for example: • 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. In exercising the discretion the Commissioner will also take into account whether and to what extent the dwelling is used to produce assessable income and for how long the trustee or beneficiary held the ownership interest in the dwelling. In your case the terms of your parents will stipulated that you could not inherit the property until you reached the age of XX. The reason for the delay was simply the terms and conditions of the will or circumstances after your parents death and not a reason outside of the will or external to the estate. Accordingly, the sale of the property will not be exempt from CGT pursuant to section 118-195 of the ITAA 1997. The capital gain must be included in your tax return.