Private ruling: Capital gains tax – deceased estate – Commissioner’s discretion to extend the two year period – main residence exemption
Date of advice: 6 September 2016
Published: October 2016
Ruling period: Year ended 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 until settlement? | A1: Yes

Relevant facts and circumstances: The deceased acquired a dwelling (the dwelling). The deceased passed away in 2014 (the deceased). The dwelling was the deceased’s main residence. The deceased’s child, (‘A’) was residing at the dwelling with their children. The executor was unable to obtain vacant possession in order to sell the dwelling. The executor requested ‘A’ vacate the dwelling on numerous occasions. The executor was compelled to commence legal proceedings to evict ‘A’ from the dwelling. ‘A’ agreed to vacate the dwelling in late 2015. The executor was required to undertake repairs to the dwelling to present the dwelling in a satisfactory state for sale. The dwelling was placed with a local real estate agent in late 2015. The dwelling was listed for sale by auction in early 2016. Settlement occurred shortly after auction in 2016. The dwelling has not been used to produce assessable income.

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: 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 29 April 2016. 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. In your case, the delay in disposing of the dwelling was due to the will of the deceased being challenged. This delay prevented you from disposing of the dwelling within the two year time limit. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.