Private ruling: CGT and deceased estate
Date of advice: 1 March 2016
Published: April 2016
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Will the Commissioner exercise his discretion to extend the 2 year period under section 118-195 of the Income Tax Assessment Act 1997 for your property? | Yes.

Relevant facts and circumstances: The deceased died in #. The property situated at # was purchased by the deceased prior to 20 September 1985. The property was used as their main residence until their death. The deceased's child resided at the property from birth until the sale of the property. The property was not rented out prior to their death or after their death. The property settlement took place on #. The delay in the property being sold was due to a dispute between the parties which was resolved by the Supreme Court by way of Consent Orders.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 118-195(1).

Reasons for decision: Summary: A capital gain or capital loss is made as a result of a capital gains tax (CGT) event happening to a CGT asset (section 102-20 of the Income Tax Assessment Act 1997 (ITAA 1997)). The most common CGT event is CGT event A1 the disposal of a CGT asset. Subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate, then you are exempt from tax on any capital gain made on the disposal of the property acquired by the deceased after 20 September 1985 if: • the property was the deceased's main residence just prior to their death • it was not being used to produce assessable income at this time, and • Your ownership interest ends within 2 years of the deceased's death. 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 following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion to extend the time period in which you can dispose of the property: • 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. In determining whether or not to grant an extension the Commissioner is expected to consider whether, and to what extent, the dwelling is used to produce assessable income and how long the trustee or beneficiary held it. In your case there was a delay from when your parent died in # to the settlement of the property on #. The delay was predominantly due to a dispute between the parties. The Commissioner will exercise his discretion to extend the 2 year time limit to the settlement date on # as the circumstances relating to the delay in the sale of the property were beyond your control. Accordingly, the sale of the property will be exempt from CGT pursuant to section 118-115 of the ITAA 1997.