Private ruling: Capital gains tax - deceased estate
Published: April 2015
Ruling period: Year ending 30 June 2015 | Year ending 30 June 2016
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: You are both the executors of the estate of the deceased. You are also equal beneficiaries of the deceased's estate. The property was the deceased's main residence. There was a delay in obtaining probate in relation to the deceased's estate due to the following: • The property was originally acquired by the deceased and their spouse as joint tenants, however, following the death of their spouse the property was not transferred into the deceased's name. In order to effect the transfer into the deceased's name, documents were required to be obtained from the relevant Government Department to prove the date of birth of the deceased's spouse. • It was then discovered that the deceased's name on the title deed was different to their birth and death certificates. Proof of the deceased's name was required from the relevant Government Department. • The deceased's will was not signed correctly and affidavits were required from the witnesses. You have both since had to undergo unexpected surgeries which has impeded on your ability to deal with the property. The property has not been used to produce assessable income.

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 after 20 September 1985 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 (for example, 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. In this case, there was a delay in the administration of the estate outside of the trustees' and beneficiaries' control. Having considered the particular circumstances of this case, the Commissioner will apply his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 and allow an extension to the two year time limit.