Private ruling: Main residence exemption for deceased estates
Published: December 2014
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

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? | A1: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The deceased passed away in the 2007-08 financial year. The deceased's principal place of residence was sold during the 2011-12 financial year. The deceased purchased the residence prior to 20 September 1985. The residence has never been used to produce assessable income. There are two executors of the deceased's Will. There were disagreements and conflict between the two executors during the administration process.

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

Reasons for decision: Summary: The Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit. | Detailed Reasoning - Detailed reasoning: Section 118-195 of the ITAA 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 prior to 20 September 1985, and • The dwelling was the deceased person's main residence just before death. You fit into the above requirements. Therefore, you 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. The two year time period to dispose of the property expired during the 2009-10 financial year. Therefore, you will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the time period. The following is a 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 (eg 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 determining whether or not to grant an extension the Commissioner is expected to consider whether and to what extent the dwelling is used to produce assessable income and how long the trustee or beneficiary held it. In this case the administration of the estate was quite drawn out due to the disagreements and conflict between the two executors. The property has never been used to produce assessable income. 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 two year time limit.