Private ruling: Commissioner's discretion
Date of advice: 18 May 2016
Published: June 2016
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

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? | A1: Yes.

Relevant facts and circumstances: The deceased's principle place of residence was never used for income-producing purposes by the deceased or the deceased estate. The delay in selling the property was due to clauses in the will which had placed an embargo on the sale of the property. The executors and trustees did not wish for the Estate to hold the property until the embargo ended and wanted the property to be sold. It was necessary to make an Application to the Supreme Court to remove the restriction on the executors and trustees. The embargo was lifted and the property was sold outside the 2 year exemption period.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 118-195(1)

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 states that if you are an individual who owns a dwelling in a capacity as trustee of a deceased estate, then you are exempt from tax on any capital gain made on the disposal of the property if: • The property was acquired by the deceased on or after 20 September 1985 and the property 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 property was acquired by the deceased before 20 September 1985; and • your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). The Commissioner can exercise his discretion in situations such as 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 Due to an embargo needing to be removed in order to sell the property and the settlement of the contract being delayed by the buyer the property was unable to be sold within two years of the deceased's death. Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the 2 year time limit.