Private ruling: Deceased Estate 2 Year discretion
Date of advice: 29 February 2016
Published: April 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017
Date scheme commenced: 1 July 2015

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 to 20XX? | A1: Yes

Relevant facts and circumstances: The deceased purchased a property after 20 September 1985 and used it as their main residence until they passed away. The deceased passed away in 20XX. You were to inherit the decedent's property when they passed away. The property is a post CGT asset. The property has not been used as a rental property. The deceased's will was challenged and you were prohibited from selling the property until the matter was settled. In 20XX the property went into your name as sole beneficiary. A sanction for settlement was passed by the Court in 20XX allowing you to sell the property as the beneficiary. You are the sole beneficiary of the deceased's property. You will be travelling to the property to spend several days readying it for sale and putting it on the market.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 118-195(1)

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 states that if you own a dwelling in your capacity as trustee of a deceased estate (or it passed to you as a beneficiary of an estate), then you are exempt from tax on any capital gain made on the disposal of the property 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). You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed). You will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the 2 year time period. The Commissioner can exercise his discretion in situations such as where: • 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 (for example, 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 circumstances outside the beneficiary or trustee's control In this case, the property was purchased by the deceased after 20 September 1985 and was their main residence until they passed away in 20XX. You have been delayed in selling the property due to your relatives will being challenged after their passing. It was only in earlier in 20XX when this situation was resolved and will be putting the property on the market as soon as possible. Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time until 20XX.