Private ruling: CGT - deceased estate extension of time
Date of advice: 25 August 2016
Published: September 2016
Ruling period: Year ending 30 June 2017
Date scheme commenced: 1 July 2016

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 passed away. The dwelling was the deceased's main residence. The dwelling has not been used to produce assessable income. The deceased's will, left the dwelling to their children in equal shares. Legal proceedings were commenced in the Supreme Court of an Australian state, challenging the will of the deceased. The Court made a number of orders, namely that X was provided with a right to reside in the dwelling for life and a monetary sum shall be paid to X or their estate upon terminating the right to reside. X vacated the dwelling. The dwelling was listed for sale and settled a couple of months later.

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

Reasons for decision: Summary: Subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you are an individual who owns a dwelling in a capacity as trustee of a deceased estate, then you are exempt from tax on any capital gain made on the disposal of the property if: • the property 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 in the dwelling ends within two years of the deceased person's death, or • the dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of the following persons: • the spouse of the deceased immediately before death, or • an individual who had a right to occupy the dwelling under the deceased's will, or • an individual who brought about the CGT event and the ownership interest in the dwelling had passed to that individual as beneficiary. In your case, the dwelling was not sold within the two year time limit. Therefore, you will only be able to disregard the capital gain from the sale of the property if the Commissioner grants an extension to the two year time limit. The Commissioner can exercise his discretion in situations such as where: • 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; 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 your case, the delay in disposing of the dwelling was due to the will of the deceased being challenged and the subsequent occupancy right granted by the courts. Having considered the relevant facts, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit.