Private ruling: Inherited Dwelling - Commissioner's Discretion
Date of advice: 25 November 2021
Published: February 2022
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner allow an extension of time for you to dispose of your ownership interest in the dwelling and disregard the capital gain or loss you made on the disposal? | A1: No.

Relevant facts and circumstances: The deceased acquired the property prior to 20 September 1985. The deceased passed away on XX/XX/XXXX. On XX/XX/XXXX Probate was granted to the executors ('you'). You prepared the property for sale. Plans to put the property on the market in March/April 20XX were shelved as a result of the Covid 19 lockdown which commenced in late March 20XX. On-site property auctions and inspections were permitted again in the relevant State from part-way through May 20XX. You and your selling agent made the decision to delay the sale of the property until the spring of 20XX. The property was listed for sale in MM 20XX. On XX/XX/XXXX, the property was sold at auction with settlement occurring on XX/XX/XXXX.

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

Reasons for decision: Summary: Practical Compliance Guideline PCG 2019/5: The Commissioner's discretion to extend the two-year period to dispose of dwellings acquired from a deceased estate outlines the factors that the Commissioner will consider when determining whether or not to exercise their discretion to extend the two-year period under section 118-195 of the Income Tax Assessment Act 1997 . Generally, the Commissioner will allow a longer period where the sale of the dwelling could not be settled within two years of the deceased's death due to reasons beyond your control. In considering whether to extend the two-year period all the factors both in favour and against the granting of the Commissioner's discretion must be considered. It is noted that a global pandemic caused lockdown periods during parts of the 2020 calendar year. However, on-site property auctions and inspections were permitted again from part-way through May 20XX but the property was not listed for sale until several months later. You state that you and your selling agent agreed to target a spring 20XX sale due to the prevailing economic uncertainty and because there were limitations on viewing access that would impact on the effective marketing of the property. In relation to the prevailing market conditions, PCG 2019/5 states that waiting for the market to improve is a factor that would weigh against the exercise of the discretion. With regards to the viewing access limitations, as on-site inspections were permitted again from part-way through May 20XX, we assume you are referring to social distancing rules which may have limited the number of potential buyers at open houses or limited inspections to individual bookings. However, it is not considered that this prevented you from being able to sell the property. The property was not listed for sale as soon as practically possible after on-site property auctions and inspections were permitted again. We have considered all your circumstances but as there was a significant period of delay that was not out of your control, the Commissioner will not exercise the discretion to grant an extension of time. Therefore, any capital gain made on the property from the date the deceased passed away until the property was disposed of will be subject to tax. That is, the first element of your cost base for the property is its market value on the deceased's date of death. You are also entitled to the 50% CGT discount in relation to the property.