Private ruling: Capital gains tax
Published: February 2015
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: The deceased passed away in the relevant financial year. The deceased acquired a property after 1985 which was their main residence until their date of death. The deceased did not leave a valid Will. There was a dispute over who the administrator of the Estate was going to be. As a result of this dispute there was a delay in obtaining the Letters of Administration from the Supreme Court. Additional delays to the winding up of the estate were due to a dispute over a loan from the deceased's relative which remained outstanding. After numerous discussions it was agreed upon that the sale of the property would be used to repay the outstanding liability. The property was in poor condition. It was decided by the administrators of the Estate that the property was to be sold in its current condition. The poor condition hindered a quick sale. The property was sold and settled in the 20XX 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 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, the deceased did not leave a valid Will which caused delays in the administration of the Estate. 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.