Private ruling: Capital gains tax
Published: September 2013
Ruling period: Year ending 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? | Yes.

Relevant facts and circumstances: You are a beneficiary of the estate of a deceased relative. Part of the estate comprised of a property which you wish to sell. The property was the main residence of the deceased. The deceased acquired the property prior to 1985. After the deceased passed away, the property was rented out for four weeks. Apart from that period of time, the dwelling was never used for income producing purposes. You were delayed in placing the property on the market due to access problems. The access problems have been resolved and you are now placing the property on the market. You are confident that the sale and settlement of the property will be completed by 30 June 20XX.

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 provides that where the dwelling was acquired by the deceased prior to 20 September 1985 and 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. This is so even if the dwelling was used for income producing purposes. 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 Act. 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 situation, you will be unable to dispose of the deceased's dwelling within two years of the deceased's death as you have been delayed in placing the property on the market. The delay was caused by problems in accessing the property. This was outside your control. Therefore, the Commissioner will exercise his discretion to extend the two year period in which the deceased's main residence must be disposed of. You will be entitled to disregard the capital gain or capital loss which results from the sale of the dwelling provided settlement for the sale occurs on or before 30 June 20XX.