Private ruling: Capital gains tax for deceased estates
Published: May 2015
Ruling period: Year ending 30 June 2015. | Year ending 30 June 2016. | Year ending 30 June 2017.
Date scheme commenced: 1 July 2014.

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 passed away in the 2013-14 financial year. You (the deceased's child) are one of several beneficiaries of the estate. The estate included the deceased's private main residence (the property). The property was purchased prior to 20 September 1985. The property has never been used to produce assessable income. The property will remain empty until sold. The final death certificate was not released until the 2014-15 financial year which delayed winding up the estate. The Will was challenged in the Supreme Court and a resolution was not reached until the 2014-15 financial year. Documents for the transfer of Land were lodged on the 2014-15 financial year with the Office of State Revenue. The transfer of land was registered the 2014-15 financial year. The beneficiaries were advised late in the 2014-15 financial year that they were able to place the property on the market for sale and the beneficiaries have done so.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows a trustee or beneficiary of a deceased estate to disregard a capital gain or loss from a dwelling 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). The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion: • 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 (eg 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 reasons outside the beneficiary or trustee's control. In your case, due to the Will being challenged and the Family Provision Act proceedings commencing, you will be unable to dispose of the deceased's main residence within the two year period. The Will was challenged and a resolution was not reached until well over a year after the deceased passed away. The property has recently been listed for sale on the open market and the beneficiaries are hoping to sell quickly. Having considered the particular circumstances of this case, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit.