Private ruling: CGT - Deceased estates - main residence
Published: June 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Will the Commissioner exercise his discretion to extend the time period in subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) where the trustee or beneficiary of a deceased estate's ownership interest ends after two years from the deceased's death? | A1: Yes.

Relevant facts and circumstances: The deceased purchased their main residence prior to 20 September 1985. The property was always used as the deceased's main residence. Due to legal proceedings, illness of the litigants, delays in providing documents, difficulty in arranging mediation and the requirement to have the agreement ratified by the courts, there were many delays in the settlement of the estate. The main residence of the deceased could not be disposed of until the estate had been settled. The settlement of the sale of the property occurred more than two years after the death of the deceased.

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 of a deceased estate to disregard a capital gain or loss from a dwelling that a deceased person acquired before 20 September 1985 if: · the trustee's ownership interest in the dwelling ends within two years of the deceased person's death or within a longer period allowed by the Commissioner, or · from the deceased's death until the trustee's ownership interest ends (the trustee's ownership period), the dwelling was not used to produce income and it was also the main residence of one or more of the following persons: · the spouse of the deceased immediately before death · an individual who had a right to occupy the dwelling under the deceased's will, or · an individual who brought about the CGT event and the ownership interest in the dwelling had passed to that individual as beneficiary. Previously there was no discretion to extend the two year period available to dispose of the property in order to claim the exemption. However, subsection 118-195(1) of the ITAA 1997 was amended so that for CGT events that occur in the 2008-09 financial year and later, the Commissioner has the discretion to extend the two year period. In your case, the trustee's ownership interest in the dwelling ended more than two years after the date of the deceased's death. However in view of your particular circumstances the Commissioner will exercise his discretion to extend the two year exemption period to the time at which settlement occurred on the sale of the deceased's main residence. The sale of the property will therefore not be subject to CGT.

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