Private ruling: Deceased estate and capital gains
Date of advice: 8 February 2017
Published: July 2017
Ruling period: Year ending 30 June 2017
Date scheme commenced: 1 July 2016

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 2016? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195 Detailed reasoning | 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 or within a longer period allowed by the Commissioner. | In this case, the property was acquired by your father before 20 September 1985. | 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 your case, you inherited an ownership interest in the property after entity A passed away. You have had several serious personal circumstances arising since. Three previous contracts of sale fell through before finally being sold. | Such circumstances are a situation in which the Commissioner can exercise his discretion. Having considered the relevant circumstances, the Commissioner will exercise his discretion and extend the 2 year time limit to 2016.


Three months later entity B passed away. | Entity A purchased the land before 1985 and built a house. | The family lived in the house | Since the death of entity A and B, the beneficiaries were left with the task of trying to sell the house. | Entity C was interested in purchasing the property. However due to their spouse's declining health, they did not go ahead and no sale was made. | This was followed by two failed contracts due to the intended buyers inability to obtain finance. | Other relations died and the beneficiaries had severe health issues. | The house was sold in 2016.