Private ruling: CGT – deceased estate
Date of advice: 7 December 2017
Published: April 2018
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Q1: Will the Commissioner exercise his discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) and extend the two year time period for disposal of the interest in the property you acquired from X’s estate? | A1: Yes

Relevant facts and circumstances: X acquired the property before 20 September 1985. The property was your X and Y’s main residence since acquisition. X died intestate. The Public Trustee administered X’s estate and you received an interest in the property. Y continued to live in the property until their death. Y’s will left you an additional interest in the property as a beneficiary of their estate. The property was placed on the market and a contract of sale was signed on XXXX, with settlement occurring on XXXX. The property remained vacant from the date of Y’s death.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows a beneficiary of a deceased estate to disregard a capital gain or loss from a dwelling if: ● the property was acquired by the deceased before 20 September 1985, or ● the property was acquired by the deceased on or after 20 September 1985 and the dwelling 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 ends within 2 years of the deceased’s death (the Commissioner has discretion to extend this period in certain circumstances). 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). X acquired the property prior to 20 September 1985; however the property was not sold within 2 years of X’s date of death. You will only be able to disregard the capital gain in relation to the interest in the property that you acquired from your father’s estate if the Commissioner extends the 2 year time period. 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 (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 Having considered the circumstances and the factors outlined above, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time.