Private ruling: Capital gains tax - extend two year time period
Date of advice: 12 April 2017
Published: September 2017
Ruling period: Year ending 30 June 20YY | Year ending 30 June 20ZZ
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise discretion under section 118-195 of the Income Tax Assessment Act 1997 and extend the two year time period until 30 June 2018? | A1: Yes

Relevant facts and circumstances: In 20WW your parent (the deceased) passed away. The deceased estate of your parent has been completely finalised and you and your two siblings inherited the main residence (the property). The Local Government agencies have implemented strategies to upgrade facilities for public use that in the area where the property is located and these is still ongoing. The public upgrades affected the sale of this property. The property has since been sold and a contract signed. The purchaser has requested an extended settlement period up until the specified date.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision: Summary: Capital gains tax (CGT) event A1 happens when you dispose of a CGT asset, as established in Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997). Subsection 118-195(1) of the ITAA 1997 states that if you own a dwelling in your capacity as trustee of a deceased estate (or it passed to you as a beneficiary of an estate), then you are exempt from tax on any capital gain made on the disposal of the property 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). You will only be able to disregard the capital gain from the sale of the property if the Commissioner extends the 2 year time period. The Commissioner can exercise his discretion in situations such as where: ● 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 (for example, 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 circumstances outside the beneficiary or trustee's control Application to your circumstances In your case, the property was purchased by the deceased and was their main residence until they passed away. The property was not sold within 2 years of the deceased's date of death. The delay was caused by circumstances outside your control due to Government agencies implementing upgrades of public use. The property has an extended settlement date in place. Having considered your personal circumstances, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time until the specified date.