Private ruling: The Commissioner’s discretion to extend the two year time limit to dispose of a dwelling
Date of advice: 1 March 2018
Published: June 2018
Ruling period: Year ended 30 June 2018.
Date scheme commenced: 1 July 2017.

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? | A1: Yes.

Relevant facts and circumstances: The deceased acquired a dwelling. (The dwelling) The deceased passed away in 2015. (The deceased) The dwelling was the deceased’s main residence. The deceased did not leave a will. The deceased was estranged from their family for a significant period of time. The deceased was survived by two siblings (A) and (B). The deceased was also survived by a number of nieces and nephews. ‘A’ and ‘B’ applied for letters of administration in 2015 without including the interests in the estate of the nieces and nephews. The nieces and nephews became aware of the application and formally opposed it. The dispute was resolved with the Court issuing a formal grant of representation in 2016. The deceased had a medical condition which contributed to their property being left in a state of disrepair and required extensive removal of accumulated personal effects. The household items were required to be inspected by various beneficiaries before a decision was able to be made in relation to their removal. These factors resulted in a delay in preparing the property for sale. The property was listed for sale and settlement was to occur in 2017. Settlement was delayed and took place a short time later in 2017.

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. | 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, the delay in disposing of the dwelling was caused by settlement of a contract of sale over the dwelling unexpectedly falling through for reasons outside the beneficiary or trustee’s control and these delays prevented you from disposing of the dwelling within the two year time limit. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.