Private ruling: Capital Gains Tax - Deceased Estates
Published: April 2015
Ruling period: Year ending 30 June 2015
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 2011-12 financial year. A sibling of the deceased and a descendant of the deceased were appointed Executors of the Will. Probate was granted in 2013. The proceeds of sale of the deceased's home (the property) was to be shared between all of the deceased's children. The deceased suffered from severe illness for over a decade before passing away. The youngest of the deceased's children resided in the property with the deceased and was still a dependant of the deceased (their other parent passed away X years prior). This child was nursing their seriously ill parent whilst still studying at university, providing palliative care at their home up until only X weeks before the deceased passed away. Numerous members of the family have also suffered from severe illnesses. The deceased's youngest child's circumstances affected the executor's ability to finalise the sale of the home. A contract for sale was signed shortly after the property was listed for sale and settlement occurred in the 2014-15 financial year.

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. 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.