Private ruling: Capital gains tax - deceased estate
Date of advice: 14 July 2015
Published: July 2015
Ruling period: Year ended 30 June 2015
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 to dispose of the main residence and the adjacent block? | A1: Yes.

Relevant facts and circumstances: The deceased passed away in the relevant financial year. The deceased solely purchased property A, prior to 20 September 1985 (the main residence). The deceased and their spouse (deceased) jointly purchased the adjacent block and constructed a garage. Block B has been used in association with the main residence. The deceased treated the two properties as their main residence up until the time of their death. Both properties which are listed on separate titles total an area of less than two hectares. Neither property has been used for the purpose of producing assessable income. Probate was granted. The trustee was unable to attend to the deceased estate within the two year period due to being diagnosed with a medical condition which required treatment. An estate agent was appointed and a campaign to sell the properties was launched. The properties were contracted for sale to the same buyer and settlement has already taken place.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 118-195(1) | Income Tax Assessment Act 1997 Section 118-120 | Income Tax Assessment Act 1997 Section 118-165

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 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 (eg 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. Having considered the particular circumstances of this case, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit. The exemption will also extend to the adjacent block where the garage is located as the requirement of sections 118-120 and 118-165 of the ITAA 1997 have been satisfied.