Private ruling: Capital gains tax – deceased estate – Commissioner’s discretion to extend the two year period – main residence exemption
Date of advice: 11 December 2017
Published: April 2018
Ruling period: Year ended 30 June 201D
Date scheme commenced: 1 July 201C

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: D acquired a dwelling before 20 September 1985 (the dwelling). D passed away in late 201A (the deceased). The dwelling was the deceased’s main residence at the time of the deceased’s passing and was not being used to derive rental income. The deceased’s estate was referred to Public Trustee by a friend of the deceased in early 201B. The Public Trustee undertook a search of the dwelling in early 201B and located an unsigned copy of the deceased’s will. The executor and beneficiaries of the deceased’s estate, including the substitute beneficiaries had predeceased the deceased. The Public Trustee commenced the process to obtain probate of the will in early 201B after searches were conducted to obtain the original will. Orders were granted by the court in early 201D for the Public Trustee to apply for an order to administer the deceased’s estate. Orders of administration were granted by the court in early 201D appointing the Public Trustee as executor of the deceased’s estate and two beneficiaries. The deceased’s dwelling was sold in 201D. Settlement of the sale of the dwelling occurred in the middle of 201D.

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 until 29 August 201Di. | 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. ● The deceased passed away without a valid will. ● There was no executor to undertake administration of the deceased’s estate. ● The beneficiaries within the deceased’s unsigned will had predeceased the deceased. ● The Public Trustee had to make application to the court to be appointed executor of the deceased’s estate and to apply for an order to administer the estate in early 201D. ● Within a couple of months of the order of Administration being granted, the dwelling was sold, with settlement of the sale of the dwelling occurring 2 years and 7 months following the deceased’s passing. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.

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