Private ruling: Capital gains tax
Published: March 2015
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016
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, until 30 June 2016.

Relevant facts and circumstances: The deceased acquired a property prior to 1985. It was their main residence until they passed away in 20XX. It has not since been used to produce assessable income. The deceased died intestate and initially there was no agreement between the potential beneficiaries as to who should become the executor. A caveat was placed on the property in 20XX by Individual A. This was not legally removed until 20ZZ. In 20XX Individual B received confirmation from probate search records that there had been no application to date for Letters of Administration regarding the deceased's estate. Individual B made an application for Letters of Administration and Individual A was notified of this. Individual A also submitted a request for Letters of Administration in 20XX. There was civil action between Individual B and Individual A in 20YY. Court mediation was required as Individual A had requested a public trustee however Individual B had offered to take on the administration of the estate alone. Mediation took place in 20YY and Individual A and Individual B were able to agree on terms appeasing both. Under that agreement, Individual B was made the administrator of the estate and Individual A was to receive their share of the estate as the executor's first order of business. A consent document was signed in 20YY granting Individual B's nomination as sole administrator. Letters of Administration were granted to Individual B in 20ZZ by the Probate Office. The Deed of Family Arrangement was signed and witnessed in 20ZZ The property is on the market however no offers have been received.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 states that if you own a dwelling in a capacity as trustee of a deceased 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, 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 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 You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed). Having considered the circumstances and the factors outlined above, the Commissioner will exercise his discretion to extend the 2 year period to 30 June 2016.