Private ruling: Capital gains tax - deceased estate - Commissioner's discretion
Date of advice: 16 May 2017
Published: September 2017
Ruling period: Year ended 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 period to dispose of the property? | A1: Yes.

Relevant facts and circumstances: The deceased acquired the residential property after 20 September 1985 when it became their main residence. The deceased later moved into an aged care facility and the property was rented out. The deceased made the choice under the absence rule to continue to treat the property as their main residence up until the time of their death. The deceased passed away around two years later and you became the beneficiary. The property was listed for sale the year after the deceased passed away. A contract for the sale of the property was signed within the 2 year exemption period with settlement occurring just outside the 2 year period. The sale of the property and administration of the estate was delayed due to: ● A close relative being diagnosed with a medical issue and their subsequent passing shortly after; ● Your partner's pregnancy and impending birth of your child; ● You commenced studies a number of months after the deceased passed away which you completed the following year; and ● You spent a period of time preparing your own home for sale.

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. The delay in disposing of the dwelling in this case was due to you being unable to attend to the deceased estate due to unforeseen personal circumstances arising during the two year period. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.