Private ruling: CGT – deceased estate – Commissioner’s discretion to extend the two year period
Date of advice: 5 December 2017
Published: April 2018
Ruling period: Year ended 30 June 2017.
Date scheme commenced: DDMMYY

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 owned a dwelling that was used as their main residence at the time of death (the dwelling. Probate of the deceased’s Will was granted shortly after their death. You were executor of the estate (along with your spouse) and sole beneficiary of the estate. Prior to the deceased’s passing, the deceased developed a hoarding problem, which meant two rooms of the dwelling were almost inaccessible, and the property could not immediately be listed for sale. The dwelling was listed on the market and sold within the two year period; however settlement occurred more than two years after the deceased death.

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. Once the property was prepared for sale, the property was listed on the market and sold shortly after, within two years of the deceased’s death. A longer than usual settlement period resulted in settlement occurring just after the two year period after the deceased death had ended. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.