Private ruling: Main residence exemption
Published: March 2015
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 200X

Ruling: Q1: Will the Commissioner exercise the discretion to extend the two year rule in regards to the disposal of a deceased's main residence? | A1: Yes


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

Reasons for decision: Summary: Section 118-195 of the Income Tax Assessment Act 1997 allows an individual to disregard a capital gain or capital loss made from a Capital Gains Tax event (ie. sale of the property) that happens in relation to a dwelling where: The ownership of the dwelling passed to you as the beneficiary of a deceased person's estate, The deceased person died after 20 August 1996, The deceased acquired the dwelling before 20 September 1985, and The dwelling was the deceased person's main residence just before death. If you meet these requirements they may be eligible to disregard the capital gains tax if: • you dispose of your interest in the dwelling within two years of the deceased's death, or • the dwelling is your main residence from the date of death until the time your ownership ends. 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. These examples are not exhaustive. 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 delay in selling the house was due to the ownership of the dwelling being challenged. As such the Commissioner will exercise his discretion in your case.

Relevant facts: The deceased's principal place of residence was the main asset of their estate. | The house could not be sold within two years of the date of death owing to a challenge to the deceased will.