Private ruling: Capital gains tax – deceased estate – Commissioner’s discretion to extend the two year period – main residence exemption
Date of advice: 28 June 2017
Published: October 2017
Ruling period: Year ended 30 June 2017.
Date scheme commenced: Year ended 30 June 2014.

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: The deceased passed away more than two years ago. The deceased owned two interests in a property. The property was acquired prior to 20 September 1985 by the deceased and late spouse as joint tenants. Upon the death of the deceased’s spouse, the deceased acquired their interest in the property. Following the passing of the deceased, a number of unsigned wills were identified by the executor of the estate, as well as an executed will. One of the beneficiaries named in an unsigned will advised that they would be contesting the executed will. Probate was granted with respect to the signed will. Following the grant of Probate, the beneficiary again indicated that a claim might be lodged. Sometime later it was advised that no further action would be pursued against the estate. The property was then placed on the market. The property received limited interest, however a reasonable offer was received approximately one year later, and following negotiations contracts were exchanged soon after. Settlement occurred shortly after.

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 a specified date. | 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 was due to the complexity of the deceased estate which delayed the completion of the administration of the estate. In this situation, the Commissioner accepts that it is appropriate to grant an extension.