Private ruling: Capital gains tax – deceased estate (2 year discretion)
Date of advice: 2 November 2018
Published: February 2019
Ruling period: Financial year ending 30 June 2018
Date scheme commenced: 1 July 2017

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? | A1: Yes. In this case, the delay that arose in regards to finalising the estate was attributed to the executor not being informed of the deceased’s death in a timely manner. Having considered the circumstances and the factors outlined below, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow a short extension of time.

Relevant facts and circumstances: The deceased passed away. The deceased owned an interest in a property pre-CGT (the dwelling). The deceased owned their original interest in the dwelling as joint proprietors until the spouse passed away when the other interest in the dwelling passed to the deceased by survivorship. The dwelling was the deceased’s main residence at the time of their death and was not used to produce assessable income. At the time of the deceased’s death they were living in a nursing home. The deceased had appointed an unrelated legal practitioner as the trustee/executor. The legal practitioner was unaware the death had occurred until notification of the death by a relative. The relative was not equipped in financial matters nor of the due process. The trustee/executor rapidly completed the probate and subsequent administration of the estate and sale of the dwelling, subsequent to this notification of death. A contract of sale could not be entered into until probate was granted. The delay in the ability to gain probate and subsequently sell the dwelling within two years was outside the trustee/executor’s control having not been aware of the death. The dwelling was listed for sale with an agent two months after being notified of the deceased’s death. Probate was granted four months after being notified of the deceased’s death. The dwelling sold at auction. Settlement occurred six months after being notified of the deceased’s death.

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