Private ruling: CGT - deceased estates
Date of advice: 19 July 2022
Published: November 2022
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner allow an extension of time for you to dispose of your ownership interest in the property and disregard the capital gain or loss you made on the disposal? | A1: No.

Relevant facts and circumstances: The deceased passed away in 20XX. The deceased acquired the property before 20 September 1985. The property was the main residence of the deceased throughout their ownership period. The property has never been used to produce assessable income. The property is less than 2 hectares in size. You inherited your ownership interest in the property as a beneficiary of the deceased's estate. The property was placed on the market soon after the passing of the deceased. Between the property being placed on the market and being sold, you entered into five contracts of sale each of which failed because the purchasers were unable to secure finance. The relevant contracts of sale were: • contract date mid 20XX; • contract date mid 20XX; • contract date mid 20XX; • contract date early 20XX; • contract date mid 20XX. The property remained on the market for the entire time between its original listing and final sale. The property was maintained regularly, and numerous open houses were held to market the property. Ultimately, a contract to sell the property was entered into in the 20XX income year with settlement occurring 2 months later.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-195

Reasons for decision: Summary: Most of the delay in disposing of the property was caused by the time taken to sell the property. A major determinant of the length of time it will take to sell a property is its asking price which is within your control. After the passing of the deceased, it took over four years to sell the property. The actual delay caused by settlement of the contracts of sale falling through accounted for only approximately XX days of this period. | Detailed Reasoning - Detailed reasoning: Subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that a capital gain or capital loss made on a dwelling acquired from a deceased estate may be disregarded if: • The property was acquired by the deceased before 20 September 1985; or the property was acquired by the deceased on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death and was not then being used for the purpose of producing assessable income; and • Your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). Practical Compliance Guideline PCG 2019/5: The Commissioner's discretion to extend the two-year period to dispose of dwellings acquired from a deceased estate outlines the factors that the Commissioner will consider when determining whether to exercise his discretion to extend the two-year period under section 118-195 of the ITAA 1997. Generally, the Commissioner will allow a longer period where the sale of the dwelling could not be settled within 2 years of the deceased's death due to reasons beyond your control that existed for a significant portion of the first 2 years. In your circumstances, the majority of the delay in disposing of the property was due to the length of time the property was on the market. Whilst it is acknowledged that there were a number of contracts of sale that fell through, the actual delay caused by this amounted to only approximately XX days of the more than four years it took to dispose of the property. Moreover, only one of these contracts had a settlement date within the X year period after the deceased's date of death. We have considered all your circumstances but, as the delay was primarily due to the time taken to sell the property, the Commissioner will not exercise his discretion to grant an extension of time.