Private ruling: Deceased estate main residence two year discretion extension
Date of advice: 16 November 2017
Published: April 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Will the Commissioner exercise his discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) in relation to the main residence exemption and extend the two year time period until XX August 20XX? | A1: Yes Having considered your circumstances and the relevant factors, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time until XX August 20XX. Further information on the relevant factors and inheriting a dwelling generally can be found on our website ato.gov.au and entering Quick Code QC52250 into the search bar at the top right of the page. Note: Subsection 118-120(3) of the ITAA 1997 specifies the maximum area of land that is covered by the main residence exemption (including the area under the dwelling) must not exceed 2 hectares. As the property is XX hectares in total, only the capital gain relating to the two hectares which includes the main residence dwelling, will be exempt under subsection 118-195(1) of the ITAA 1997.

Relevant facts and circumstances: The deceased died on DDMMYY Probate was granted on XX February 20XX. The deceased’s spouse acquired the property before 20 September 1985. On X April 19XX the deceased acquired a 50% interest in the property when the spouse transferred the interest to the deceased, making them joint tenants. The deceased acquired their spouse’s ownership interest in the property upon the spouse’s death on DDMMYY The property consisted of a dwelling on more than two hectares of land. The dwelling was the main residence of the deceased and the late spouse from acquisition to the time of their death. The administration of the estate was delayed by challenges and delays experienced in disposing of the property including rezoning issues and failed contracts for sale. The first contract for sale for the property was entered into in May 20XX. This contract was terminated in March 20XX due to the purchaser failing to settle the contract. The second contract for sale for the property was entered into in June 20XX, but was later terminated by the purchaser in August 20XX. The third contract for sale for the property was entered into on XX January 20XX and settled on XX August 20XX. The property has either been under contract of sale, optioned, in negotiation or advertised for sale from 20XX until its sale in 20XX. No private or business use was conducted on the property since the deceased’s death.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 118-195(1), and | Income Tax Assessment Act 1997 subsection 118-120(3)