Private ruling: Capital gains tax – deceased estate – Commissioner’s discretion
Date of advice: 27 July 2017
Published: November 2017
Ruling period: Year ended 30 June 201C.
Date scheme commenced: 1 July 201B.

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 until settlement? | A1: Yes.

Relevant facts and circumstances: The deceased acquired a dwelling (the dwelling) The deceased passed away after 20 September 1985. (The deceased) The dwelling was the deceased’s main residence. The deceased left a will in which they appointed their partner 'A’ as sole executor. ('A’) The will also appointed the deceased’s child, ('B’) and ('C’) as substituted executors. The deceased’s will also provide a life interest to 'A’. 'A’ occupied the dwelling as their main residence. 'A’ passed away in 201A without completing the administration of the deceased’s estate. 'C’ passed away shortly after the deceased. Delays were experienced in obtaining probate of the deceased’s estate. Probate was granted in 201B. The dwelling was not used to produce income. The dwelling was prepared for sale and sold at auction in 201C.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 118-130(3) | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision: Summary: The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time until settlement. | Detailed Reasoning - Detailed reasoning: The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person’s estate sell that dwelling within two years of the date of death. Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was: ● Acquired by the deceased before 20 September 1985, or ● The deceased’s main residence when they died. The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the will is challenged). There must not be any other factors mitigating against exercising it. The delay in disposing of the dwelling was due to the complexity of the deceased estate which delayed the completion of the administration of the estate. The Commissioner accepts that it is appropriate to grant the extension that you have requested.