Private ruling: Capital gains tax - deceased estate
Published: November 2014
Ruling period: Year ended 30 June 2010
Date scheme commenced: 1 July 2009

Ruling: Q1: Will the Commissioner exercise his discretion and allow an extension of time to the two year period? | A1: Yes

Relevant facts and circumstances: The deceased died during the 1996-97 financial year leaving a Will. A challenge to the Will was lodged and subsequently settled by Supreme Court Order in excess of 10 years later. Probate was then granted to the Public Trustee. The deceased's main residence was acquired by the deceased prior to 19 September 1985 and was sold by the Public Trustee almost one year after Probate had been granted. The property remained vacant, in a state of disrepair and was non-income producing for the whole time from the date of death to the date of sale. The Public Trustee was not able to sell the property within two years of death as Probate was not granted until over 11 years later. The property was the deceased's main residence from the date of acquisition until the date of death. It was not income producing at any time and was sold as soon as possible after Probate was granted.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195 | Explanatory Memorandum for the Tax Laws Amendment (2011 Measures No 9) Act 2012

Reasons for decision: Summary: Please note that all references are to the Income Tax Assessment Act 1997. Subsection 118-195(1) provides a capital gains tax (CGT) exemption to a beneficiary or trustee of a deceased estate where a CGT event happens to a dwelling (or an ownership interest in a dwelling) acquired from a deceased estate. An exemption is provided where the beneficiary or trustee's ownership interest in the dwelling ends within two years of the deceased's death and just before the deceased's death (for pre-CGT dwellings) the dwelling was their main residence. The Commissioner has discretion to extend the two year time period in subsection 118-195(1) where the trustee or beneficiary of a deceased estate's ownership interest ends after two years from the deceased's death. This discretion may be exercised in situations such as where: 1. the ownership of a dwelling or a will is challenged; 2. the complexity of a deceased estate delays the completion of administration of the estate; 3. 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 4. settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary or trustee's control. Using the guidelines provided, in particular points 1 and 2 above, the Commissioner will exercise his discretion under section 118-195 to extend the two year period for you to cease your ownership of the property.