Private ruling: CGT 2 year main residence exemption
Published: October 2012
Ruling period: Year ended 30 June 2012.
Date scheme commenced: 1 July 2011.

Ruling: Question and answer: | Will the Commissioner exercise his discretion to extend the 2 year period for the exemption from CGT for main residence acquired from a deceased person? | 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 (ITAA 1997) provides a full CGT exemption for capital gains and capital losses made by a beneficiary or a trustee of a deceased estate from one of the specified CGT events in relation to a dwelling or the taxpayer's ownership interest in the dwelling. The exemption only applies if certain conditions are satisfied. A full exemption is available if the dwelling was acquired by the deceased person after 19 September 1985, the dwelling was the deceased's main residence just before the deceased's death, it was not being used to produce assessable income at that time and the individual disposed of the dwelling (e.g. by sale) within two years of the deceased's death, or within a longer period allowed by the Commissioner. The Commissioner has discretion to extend the two-year time period in relation to CGT events that happened in the 2008/09 income year and later income years. The explanatory memorandum (EM) to the Bill that added the discretion to Section 118-195 of the ITAA 1997, the Tax Laws Amendment (2011 Measures No 9) Bill 2011, includes the following non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion: · 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 (e.g. 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 reasons outside the beneficiary or trustee's control. In this case, the deceased purchased the property after September 1985 and treated and elected to treat this property, as their main residence until their death. You encountered difficulties selling the property within the 2 year exemption period and did not secure a sale until the end of the relevant year. The Commissioner will exercise his discretion to apply an extension to the exemption from 2 years, to the date of sale.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: The deceased acquired the property post September 1985. | The property was the deceased main residence. | The deceased was admitted to hospital and the property was placed on the market. | The deceased chose the property as their main residence until they died. | The property remained empty until sold and no income was earned during this period. | The property was located in a complex. | The property was sold with settlement at the end of relevant year. | You made all reasonable efforts to sell the property within the 2 years exemption. | You had difficulties selling the property due to special conditions and requirements of the complex, and an unfavourable real-estate market as per the detailed attachments to the ruling application. | The efforts made to sell the property included: | · Engaging several real-estate agents, | · Extensive marketing communications e.g. fliers, online/paper advertisements. Local press adds, radio advertisements.