Private ruling: Capital gains tax - deceased estate, main residence and extension of time
Published: November 2013
Ruling period: To a specified date in 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Will the Commissioner exercise 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. Your parent passed away more than three years ago. You were your parent's carer. Your parent owned a dwelling which was their main residence. You now suffer several medical conditions as a result of the death of your parent which has affected your capacity to deal with the disposal of your parent's dwelling. One of your children has needed your support as they were unemployed. Your child is now employed and to assist them, you care for your grandchild whilst your child is working. You also work part time. Your eldest child is coming to reside with you shortly. This year a private ruling was issued to you where the Commissioner's discretion to extend the two-year period to dispose of your parent's dwelling was granted to you until a specified date. The dwelling has been listed with a local real estate agent mid this year. Unbeknown to you the real estate agent who was handling the dwelling left the real estate agency and the dwelling was not allocated to another real estate agent to handle. You only became aware of this when you contacted the real estate agency a number of weeks after the real estate agent had left. A real estate agent is currently handling the dwelling and it is currently under offer. Settlement on the disposal of the dwelling will occur before a specified date.

Relevant legislative provisions: 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: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision. A capital gain or capital loss is disregarded under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) where a CGT event happens to a dwelling if it passed to you as an individual beneficiary of a deceased estate or you owned it as the trustee of the deceased estate. The availability of the exemption is dependant upon: · who occupied the dwelling after the date of the deceased's death, or · whether the dwelling was disposed of within two years of the date of the deceased's death. For a dwelling acquired by the deceased, you will be entitled to a full exemption if: · the dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of the following relevant individuals: · the spouse of the deceased immediately before death (except a spouse who was living permanently separately and apart from the deceased) · an individual who had a right to occupy the dwelling under the deceased's will, or · an individual beneficiary to whom the ownership interest passed and that person disposed of the dwelling in their capacity as beneficiary, or · your ownership interest ends within two years of the deceased's death. In your case, when the deceased died, the dwelling passed to you. The dwelling was the deceased's main residence prior to death, and at that time, was not being used to produce assessable income. However, the dwelling was not occupied by a relevant individual after the deceased's death and therefore this basis of exemption is not available. Subsection 118-130(3) of the ITAA 1997 provides that where the sale or other disposal of the dwelling proceeds under a contract, the ownership interest ends at the time of settlement of the contract of sale and not at the time of entering the contract. The disposal of dwelling will be settled more than two years after the deceased's death, therefore, the alternative basis of exemption is also not satisfied. However, subsection 118-195(1) of the ITAA 1997 confers on the Commissioner discretion to extend the two year exemption period, thus this alternative basis of exemption in the provision may apply. 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 (e.g. 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. The further delay in disposing of the dwelling was caused the real estate agency not engaging another real estate agent upon the agent handling the dwelling left their employment. In your circumstances, we consider your request to extend the period by another couple of months is a reasonable period of time given the circumstances. 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 to allow a further extension with settlement on the dwelling to occur prior to a specified date.