Private ruling: capital gains tax - extension of time
Published: February 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

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 purchased a property prior to 20 September 1985. This property was their main residence. The deceased was accepted into a care facility. They requested that the property not be sold. In the 2010-11 financial year, the individual passed away. Probate was granted in the 2010-11 financial year. A family member of the executor was diagnosed with an illness. The administration of the estate was put on hold during 2011. In the 2012-13 financial year, the property was listed with a real estate agent. The executor accepted an offer in the 2012-13 financial year to sell the property. On settlement day, one of the purchasers had an issue with their finance. Settlement occurred more than two years after the individual's death.

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

Reasons for decision: Summary: As per subsection 118-195(1) of the ITAA 1997, a capital gain or capital loss you make from a capital gains tax (CGT) event that happens in relation to a dwelling (or your ownership interest in it) is disregarded if: (a) you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and (b) at least one of the items in column 2 and at least one of the items in column 3 of the table are satisfied. Beneficiary or trustee of deceased estate acquiring interest Item One of these items is satisfied And also one of these items 1 the deceased *acquired the *ownership interest 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 your *ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner ........... 2 the deceased *acquired the *ownership interest before 20 September 1985 the *dwelling was, from the deceased's death until your *ownership interest ends, the main residence of one or more of: (a) the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or (b) an individual who had a right to occupy the dwelling under the deceased's will; or (c) if the *CGT event was brought about by the individual to whom the *ownership interest *passed as a beneficiary - that individual In this case when the individual died the property passed to the executor of the estate. The property was acquired by the deceased prior to 20 September 1985 and it was their main residence just prior to their death. The property was sold outside the two year period outlined in subsection 118-195(1) of the ITAA 1997. Therefore, the estate will only be able to disregard the capital gain from the sale of the property if the Commissioner grants an extension to the two year time limit. The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion: a) the ownership of a dwelling or a will is challenged, b) the complexity of a deceased estate delays the completion of administration of the estate, c) 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 (eg the taxpayer or a family member has a severe illness or injury), or d) settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for reasons outside the beneficiary or trustee's control. | Detailed Reasoning - Application to your circumstances: In this case, the listing of the property for sale was delayed due to the illness of a family member of the executor. The settlement of the contract of sale over the dwelling was also delayed due to an issue with the purchaser's finance. These unexpected delays were outside of the trustee's control. The property was held by the trustee for just over two years. 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.

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