Private ruling: CGT – deceased estate – main residence
Date of advice: 16 May 2018
Published: July 2018
Ruling period: Year ending 30 June 201X
Date scheme commenced: 1 July 201X

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 to 30 June 2018? | A1: Yes.

Relevant facts and circumstances: The deceased and their spouse acquired the dwelling prior to 1985 and used it as their main residence. The deceased’s spouse passed away after 1985 and the deceased acquired the spouse’s interest in the property. The dwelling was not used to produce assessable income. There were complexities with the administration of the estate. The dwelling was placed on the market and sold. The sale happened more than two years after the deceased’s death.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 provides that if you own a dwelling as the trustee of a deceased estate then you can disregard the capital gain you make on the disposal of the dwelling or your ownership interest in it if: ● the deceased acquired the ownership interest on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death and was not then being used for the purpose of producing assessable income, or the deceased acquired the ownership interest before 20 September 1985; and ● your ownership interest ends within two years of the deceased’s death, or within a longer period allowed by the Commissioner. In your case, the deceased acquired a 50% interest in the dwelling prior to 1985. The deceased acquired a further 50% interest in the dwelling when their spouse passed away after 1985. The dwelling was the main residence of the deceased until they passed away. The dwelling has not been sold within two years of the deceased’s death. Therefore, you will only be able to disregard the capital gain made from the sale of the dwelling if the Commissioner allows a longer period to dispose of the dwelling. The Commissioner generally allows a longer period in situations where: ● 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. Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time.