Private ruling: CGT - Deceased Estate - 2 year extension
Date of advice: 9 February 2017
Published: July 2017
Ruling period: Year ending 30 June 2017
Date scheme commenced: 01 July 2016

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and extend the 2 year period? | A1: Yes

Relevant facts and circumstances: The deceased passed away. The property was acquired by the deceased. The deceased used the property as their main residence for the entire ownership period. The property was never used for income producing purposes. The property valued by a real estate agent and placed on the market After no offers were made after several months, the property was listed with multiple agents. The property was listed on the internet as a “sale by owner”. The price was lowered. The property was sold. The property settled.

Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 states that if you own a dwelling in your capacity as trustee of a deceased estate (or it passed to you as a beneficiary of an estate), then you are exempt from tax on any capital gain made on the disposal of the property if: ● the property was acquired by the deceased before 20 September 1985, and ● your ownership interest ends within 2 years of the deceased's death (the Commissioner has discretion to extend this period in certain circumstances). You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed). In this case, the property was purchased by the deceased after 20 September 1985 but was not sold within 2 years of the deceased's date of death. The Estate will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the 2 year time period. The Commissioner can exercise his discretion in situations such as where: ● 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 circumstances outside the beneficiary or trustee's control In this case, the Commissioner accepts that the property was marketed for sale in a timely fashion and that a genuine effort was made to sell the property. Due to the slow real estate market, the property did not sell, despite multiple attempts to sell by using multiple listings and price adjustments. Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time.