Private ruling: CGT – deceased estate – Commissioner’s discretion to extend the two year period
Date of advice: 9 August 2017
Published: November 2017
Ruling period: Year ended 30 June 2018.
Date scheme commenced: 1 July 2017.

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 until settlement? | A1: Yes.


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 settlement. | 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 this case, a contract was entered into to sell the dwelling within the two year time period; however the purchaser was unable to complete the contract and as a result the contract did not proceed. The subsequent delay in the sale of the property was caused by the initial contract unexpectedly falling through. 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 until settlement.

The deceased acquired a dwelling. (the dwelling) | The deceased passed away in 201X. (The deceased) | The dwelling was the deceased’s main residence. | The dwelling was used to produce assessable income from 201X. | The title to the dwelling was transferred to the deceased’s children as beneficiaries. | The dwelling was placed on the market and a contract was entered into in 201X. | The settlement period was for a period of 365 days. | The purchasers requested an extension for the settlement date to DDMMYY. | The purchaser advised on DDMMYY that they were unable to proceed with the contract as they were not able to obtain finance. | A new real estate agent was engaged to sell the dwelling and a contract was entered into a short time later in 201Y. | Settlement for the sale of the contract will occur in early 201Z.