Private ruling: Capital gains tax - deceased estate
Date of advice: 15 July 2015
Published: July 2015
Ruling period: Year ending 30 June 2016
Date scheme commenced: 1 July 2015

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 to dispose of the property, to 30 June 2016? | A1: Yes.

Relevant facts and circumstances: The deceased died in June 20XX and did not leave a valid Will. Approximately 2 years later, the administrator of the deceased estate was appointed. One of the assets of the deceased estate which needs to be sold is the deceased's main residence (the property). The property was purchased pre-CGT and the title is registered in the names of the deceased and the partner as joint tenants. They divorced post-CGT, and as part of the property settlement, it was agreed that the property would become solely owned by the deceased and would be transferred into the deceased's sole name. The property was the main residence of the deceased from the date of purchase until death. During the course of the administration, it was discovered that the title to the property was not transferred into the sole name of the deceased. The administrator has instructed its lawyers to apply to the courts for an order that the title of the property be transferred into the deceased's sole name pursuant to the matrimonial property settlement agreed between the parties previously. After the title to the property has been transferred to the deceased's sole name, the administrator of the deceased estate will be registered on the title of the property as the administrator of the estate and will be able to sell the property as part of the estate administration. There have been complications in relation to the legal process and the title has not yet been transferred to the administrator of the deceased estate.

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 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.