Private ruling: CGT – deceased estate – Commissioner’s discretion to extend the two year period
Date of advice: 27 April 2018
Published: August 2018
Ruling period: Year ended 30 June 20XX. | Year ended 30 June 20XX.
Date scheme commenced: 1 July 20XX.

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.

Relevant facts and circumstances: The Deceased purchased the dwelling after 19 September 1985 (the Dwelling). The Deceased passed away after a number of years. The Dwelling was the Deceased’s main residence at the time of their death. The Dwelling was not used for income producing activities and no income has been received from the Dwelling after the passing of the Deceased. The Deceased’s child (you) were named as executor of the Deceased’s estate. You were the primary carer of the Deceased up until their death. Shortly after the passing of the Deceased you developed a medical condition that failed to respond to treatment. The medical condition was treated with strong medication that altered your immune system. Shortly after you were treated with strong medication and as a direct result of your altered immune system you developed another condition which led to you developing a secondary disorder. You lost a significant amount of weight and were confined only to Activities of Daily Living (ADL’s) being eating, bathing, dressing, toileting, transferring (walking) and continence. As a result you had to retire from work. For approximately 12 months you were incapacitated with this condition however your health was slowly improving. Approximately two years after the Deceased passed away you had a mild relapse which gradually resolved over six weeks. Shortly after the mild relapse you suffered from a separate medical condition which you sought immediate medical attention however due to your poor underlying health you developed severe pain which resulted in you needing a walking frame (currently using a walking stick). As a result of having to take the weight of your body on your hands and arms, the pain and stiffness associated with your pre-existing conditions spread. As a result of losing the function of your feet and hands, your doctor had no option but to refer you to the Council for support care services for your ADL’s. In a letter your doctor stated that the recovery timeframe for your condition is expected to be approximately six months; however as part of your treatment you are on significant medications that have impacted the clarity of your thinking. Your doctor states that in your current state it would be projected that it will be another five to six months before you are able to address more complex issues/decisions. You have only just engaged a solicitor to commence the process of obtaining Probate. You expect a capital gain to be realised.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 118-130 | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 section 118-195

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. | 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. In your circumstance after the care of your parent ceased you developed several medical conditions and struggled with common activities which confined you to your home. As your health deteriorated you were limited to ADL’s only and for a period of time needed in home care for assistance of these tasks. During this time you have been on and are currently on significant medications that have impacted the clarity of your thinking and the ability of you to make decisions. The delay in disposing of the dwelling was due to you being unable to attend to the deceased estate due to severe unforeseen medical circumstances arising during the two year period. The Commissioner accepts that it is appropriate to grant the extension that you have requested.