Private ruling: Capital gains tax – deceased estate – Commissioner’s discretion
Date of advice: 19 December 2017
Published: May 2018
Ruling period: Year ended 30 June 2018.
Date scheme commenced: 16 March 2015.

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: The deceased passed away more than more than two years ago. The deceased owned a dwelling (the dwelling) which was acquired by the deceased and spouse prior to 20 September 1985 as joint tenants. The deceased was predeceased by their spouse. Following the death of the deceased’s spouse, the property title was not amended to reflect that the deceased had acquired spouse’s share upon their death. The deceased left no valid will, and was not survived by any spouse or children. In light of this, upon the deceased’s death, a distant relative of the deceased’s spouse produced a document which they purported to be the will of the deceased. The purported will was challenged by other family members on the basis that it was forged. A grant for Letters of Administration was made more than two years after the deceased’s death. The dwelling was the main residence of the deceased at the time of death. Since the deceased’s death, the dwelling has not been used to produce income. The dwelling was sold and settled shortly after the grant of administration.

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 until settlement. | 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, a dispute in relation to purported will of the deceased caused a delay in the grant of administration and the subsequent disposal of the dwelling. The Commissioner accepts that it is appropriate to grant the short extension to settlement.