Private ruling: CGT – deceased estate – Commissioner’s discretion two year extension
Date of advice: 4 August 2017
Published: November 2017
Ruling period: Year ended 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: Prior to 20 September 1985, the deceased acquired a dwelling with their spouse as joint tenants. The dwelling was used as the family home since the time of its acquisition. Some years later, the deceased spouse passed away. The deceased did not arrange to have the title changed, to reflect that they had become the sole owner. During this time, the deceased struggled with illness and was heavily reliant on their children. Following the death of the deceased, their children found it difficult to progress the family home to sale for emotional reasons; however one of the deceased’s children, became aware of the two year period to dispose of the dwelling and instructed gained appointment as Administrator of the estate in order to sell the property. Letters of Administration were granted and the property was sold, with settlement occurring shortly after. The property was the main residence of the deceased at the time of death. The property has never been used to produce income.

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 a short 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. Following the grant of Administration, the Administrator moved quickly to dispose of the dwelling; with settlement of the property occurring a short time after the end of the two year period. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.