Private ruling: Capital gains tax - deceased estate - Commissioner's discretion to extend the two year period - main residence exemption
Date of advice: 21 October 2016
Published: February 2017
Ruling period: Year ended 30 June 20ZZ.
Date scheme commenced: 1 July 20YY.

Ruling: A1: Yes.

Relevant facts and circumstances: You purchased your principle place of residence in 20WW. X resided at this address until your death. Under the terms of the Will two people were appointed as joint executors of the Estate. You left a full Will and Testament; however, the executors were put on notice prior to the Grant of Probate that the Will was going to be contested in its entirety. Probate was subsequently granted. In 20XX the Executors received formal notice contesting the entitlement and distribution of the Estate. In 20YY formal notice to remove an executor was received and contested. The uncertainty regarding the distribution of the Estate and the Executor's ability to deal with the assets meant that the property was not in a position to be sold. After receiving legal advice that the property could be sold, it was listed for sale. The property sold after auction and settlement occurred in 20YY.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 118-130(3) | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision: Summary: The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time. | Detailed Reasoning - Detailed reasoning: The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person's estate sell that dwelling within two years of the date of death. Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was: ● Acquired by the deceased before 20 September 1985, or ● The deceased's main residence when they died. The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the will is challenged). There must not be any other factors mitigating against exercising it. In your case, the delay in disposing of the dwelling was due to the will of the deceased being challenged. This delay prevented you from disposing of the dwelling within the two year time limit. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.

Subject: Capital gains tax - deceased estate - Commissioner's discretion to extend the two year period - main residence exemption: 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 until a specified date?