Private ruling: CGT - deceased estate
Published: August 2013
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Question and answer | Will the Commissioner exercise his discretion to allow an extension of the two year time period to disregard any capital gain or loss made on the sale of the dwelling of the deceased? | No.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The deceased passed away in 20XX. The deceased did not have a will. You contacted a solicitor in 20YY. There was no reason for the delay in contacting the solicitor other than you could not agree who should be the administrator of the estate and also one of deceased's children was undecided as to whether to retain ownership in their share of the property, or to sell the property. You became joint administrators of the estate later in 20YY. The title for the estate was processed in your name later in 20YY. The former main residence of the deceased (the property) has been listed for sale since 20ZZ. The property was never used for income producing purposes. A contract for sale was signed later in 20ZZ. You have stated that you set the sale price low in order to sell it within two years of the deceased's death and thus avoid any CGT implications. You entered into a contract for sale in 20ZZ, which was subsequently extended at the request of the purchaser. You rejected a request for a further extension of the contract as it would bring the settlement date beyond two years of the deceased's death and you did not want to be liable for CGT.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-195

Reasons for decision: Summary: Where you inherit the dwelling of a deceased person, you may be exempt from any capital gain you make when you sell the property. Section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where the dwelling is sold within two years of the deceased's death, the trustee or beneficiary can disregard the capital gain or capital loss resulting from the sale. Where the sale of the property is delayed, the trustee or beneficiary of the deceased estate may apply to the Commissioner to grant an extension of the two year time period under the ITAA 1997. Generally, the Commissioner would exercise the discretion in situations where the delay is due to circumstances which are outside of the control of the trustee or beneficiary, for example: · 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 unforseen 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 or a contract of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary or trustee's control. In your case, the delay in selling the property was due, in part, to you not seeing a solicitor until a significant period of time had passed, which in turn, caused delays with you becoming executors of the estate and with changing the title deed for the property. Further delay was caused when you did not list the property for sale until months after the title deed was transferred into your name. The most recent delay was caused by you rejecting a request for the extension of a contract for sale of the property solely for the purpose of the elimination of any CGT liability by seeking the Commissioner's discretion. The Commissioner considers that the circumstances of your case do not warrant the exercise of the discretion as the ownership of the property was not challenged; the will was not challenged; the estate was not complex; there were no unforseen or serious personal circumstances causing delay and there were no significant delays that fell outside of your control. Although there was some delay caused by the prospective buyers extending the contract, this delay was only a matter of weeks, whereas the majority of the delay was caused by your lack of action between the date of the deceased's death and the date the property was listed for sale. Therefore, the Commissioner will not exercise his discretion to extend the two year period in which a deceased's main residence must be disposed of. You are not entitled to disregard the capital gain or capital loss which may result from the sale of the property. Any capital gain or loss made on the sale of the property will not be disregarded.