Private ruling: Capital gains tax - deceased estate
Published: December 2014
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

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: At the time of their death, the deceased was the proprietor of the property. From the date of purchase to the date of death, the deceased resided at the property as their principal place of residence. At the time of death, the property was not being used to produce assessable income. There was a dispute as to whether the deceased died intestate or with an informal will. Court proceedings ensued. By orders, X was appointed as special Administrator of the deceased's estate. Prior to this date, no one had been appointed to the role of Administrator and therefore no one had the authority to deal with any assets within the deceased's estate. Prior to listing the property for sale, it had to be vacated as assessed for repairs. There were insufficient cash assets within the estate to meet the expenses of removal and storage of the deceased's personal effects, furniture and chattels. Accordingly the clearing of the property could not proceed until funds were received from the deceased's superannuation fund. The property went to auction and the sale was completed during the 2014-15 financial year.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows a trustee of a deceased estate to disregard a capital gain or loss from a dwelling that a deceased person acquired after 20 September 1985 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). The following is a non-exhaustive list of situations in which the Commissioner would be expected to exercise the discretion: • 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 (eg 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 reasons outside the beneficiary or trustee's control. In this case, there was a dispute over the validity of an alleged informal will and no administrator was appointed to the deceased's estate for a period of time. Having considered the particular circumstances of this case, the Commissioner will apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit.