Private ruling: capital gains tax
Published: November 2012
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2011

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: No.

Relevant facts and circumstances: The arrangement that is the subject of the private ruling is described below. This description is based on the following documents. These documents form part of and are to be read with this description. The relevant documents are: · the application for private ruling. You are the executor of the Will of your late relative. The beneficiaries under the Will are you and another individual. You have resided in the house since the time of purchase by your relative with your children. You have continued to reside in the house following your relative's death. Your relative's Will does not state that you are permitted to live in the house upon their passing. In the Will, your relative left a portion of the residue of their estate to you and a portion of the residue of the estate to another individual. Notwithstanding the provisions of the Will, you and the individual have reached agreement that the residue of your relative's estate can be divided equally between each of you. This is provided that you can continue to reside in the house until a future point in time. The house would then be sold and the net proceeds would be divided equally between you and the other individual. The terms for the proposed re-arrangement between you and the individual are set out in a proposed Deed. Under the terms of that Deed, you have until a certain date to list the house for sale, being a number of years from the date of your relative's death. This would allow you to reside in the house until it is sold.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection118-195(1).

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 states that if you own a dwelling in a capacity as trustee of a deceased estate, you are exempt from tax on any capital gain made on the disposal of the property if: · the property was acquired by the deceased before 20 September 1985, 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 Commissioner can exercise his discretion in situations such as: · 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 (for example, 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 circumstances outside the beneficiary or trustee's control. You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed). The deceased purchased the property prior to their death. Due to a private agreement between you and another individual that will allow you to live in the property for a period of time, the property will not be sold within 2 years of the deceased's death. In your case, there has been no official challenge of the Will, the estate was not complex, there were no unforseen or serious personal circumstances that arose during the period, and the settlement of the sale contract was not delayed due to circumstances beyond the beneficiary or trustee's control. An agreement that allows you to live in the property is of a different nature to the situations in which the Commissioner can exercise his discretion where the sale of a property is unable to be completed due to reasons outside of the trustee's or beneficiary's control. Having considered the relevant circumstances, the Commissioner will not exercise his discretion and extend the 2 year time limit.

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