Private ruling: CGT – deceased estate – Commissioner’s discretion to extend the two year period – main residence exemption
Date of advice: 14 August 2017
Published: November 2017
Ruling period: Year ended 30 June 201G.
Date scheme commenced: 1 July 201F.

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 jointly acquired a dwelling in 197A (the dwelling). The other joint tenant who purchased the dwelling was shown as M on the title deeds. The deceased passed away in 201C (the deceased). The dwelling was the deceased’s main residence. The beneficiary of the deceased’s estate was related to the deceased (beneficiary). The executor of the estate was N. As N was unable to find details of M, they were unable to apply for probate of the estate. The beneficiary had ongoing communication with N to ensure the issue around the identity of the joint tenant was resolved and the deceased’s estate was administered. Due to the time delay in administering the estate, the beneficiary contacted private solicitors in 201D seeking assistance in the administration of the estate (solicitors). Enquiries undertaken by the solicitors revealed that M went by another name of P. P had in fact died in 197B. There is no evidence that probate was ever granted for P or M. The child of P had during a period time resided in the dwelling with the deceased and made a successful claim on the deceased’s estate under the succession legislation. These legal proceedings commenced in 201E and settlement was reached in early 201F. As part of obtaining a grant of probate on the deceased’s estate, the solicitors were required to notify eligible persons of the death of the deceased and ensure they did not intend to make a claim against the deceased’s estate. The deceased’s estate was granted probate in late 201E. Following the grant of probate, title of the dwelling was transferred to N in early 201F. As the dwelling had remained vacant and was not maintained, extensive cleaning up was undertaken prior to placing the dwelling on the market to auction. The property sold at an auction in 201F.

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 | Income Tax Assessment Act 1997 subsection 118-195(1)

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 until the requested date. | 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 case, significant time delays occurred in the administration of the estate of the deceased, as the joint tenant who jointly owned the dwelling with the deceased could not be identified and located. The sole beneficiary tried to have the estate administered, but the process was delayed and the house deteriorated in condition. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.