Private ruling: The Commissioner’s discretion to extend the two year time limit to dispose of a dwelling
Date of advice: 25 June 2018
Published: September 2018
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019
Date scheme commenced: 1 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 allow an extension of time to the two year period until DDMMYY? | A1: Yes

Relevant facts and circumstances: D acquired a dwelling prior to the 20 September 1995 (the dwelling). D passed away (the deceased). The dwelling was the deceased’s main residence. The children of the deceased were executors and beneficiaries of the deceased’s estate. The delay in disposing of the dwelling was largely due to the medical conditions of some of the executors and beneficiaries of the deceased’s estate. A child of the deceased cared for the deceased during the deceased’s illness and found it difficult to deal with the administration of the estate. The youngest child of the deceased, suffered a severe medical condition exacerbated by the passing of the deceased and stress associated with administering the deceased’s estate. The child sought medical treatment and has been unable to work in a full time capacity since the deceased’s passing. An executor was only able to administer the estate by remaining connected to the deceased and this took the form of relocating certain furniture or articles that formed the deceased estate to the executor’s residence. The relocation of large items located inside and outside of the deceased’s dwelling commenced during 12 months following the deceased’s passing and was completed prior to placing the dwelling on the market. Since the date of the deceased’s passing, the house has remained unoccupied. A real estate agent was appointed and the dwelling was placed on the market within 21 months of the deceased’s passing. Contracts in respect to the sale of the dwelling were exchanged and a deposit was paid by the purchaser following the auction. The date of settlement has been delayed by the purchaser for some months following the exchange of contracts. Settlement of the sale of the dwelling is scheduled to occur soon.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 118-130(3) | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision: Summary: The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time until DDMMYY. | Detailed Reasoning - Detailed reasoning: The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person’s estate sell that dwelling within two years of the date of death. Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was: ● Acquired by the deceased before 20 September 1985, or ● The deceased’s main residence when they died. The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the Will is challenged). There must not be any other factors mitigating against exercising it. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.