Private ruling: Capital Gains Tax - Deceased Estates
Published: April 2015
Ruling period: Year ending 30 June 2016.
Date scheme commenced: 1 July 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 in the 2009-10 financial year. There has been a falling out between the named Executors of the will. Almost two years after the deceased passed away, the state's Supreme Court granted probate to you as sole Executor. There have been numerous Supreme Court summonses to date and there are still matters relating to the will before the courts. The home and main residence of the deceased (the property) was purchased prior to 1985. The property has been the cause of much dispute, but has had to be listed for sale. There is currently a one-year put and call option agreement in place over the property. It is anticipated the sale will go ahead in late 2015, with settlement two months later.

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 or beneficiary of a deceased estate to disregard a capital gain or loss from a dwelling 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 have been numerous delays in settling the estate due to the will being challenged. There are matters relating to the will still before the courts to date. Despite the setbacks, the property is under a one-year put and call option and due to be sold in late 2015, with settlement in the 2015-16 financial year. 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.