Private ruling: CGT - main residence exemption - extension
Date of advice: 2 August 2016
Published: September 2016
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

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 to the sale contract settlement date? | A1: Yes.

Relevant facts and circumstances: The deceased passed away in 20XX leaving their home to be divided equally between the beneficiaries. The home was purchased prior to 1985 and was always used as the deceased's principle place of residence. It was never rented or used to produce income before or after the deceased passed away. Prior to the deceased passing away, the deceased entered into negotiations with a developer who was constructing a property next door with the intention to sell the property to the developer. The negotiations continued after the deceased passed away but ended unsuccessfully in 20XX. The following month the property was listed for 'Expressions of Interest'. A few months later a sale contract was entered into and successfully settled.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195 | 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 passed away more than two years prior to the date the property was sold. During the initial two years, the beneficiaries commenced negotiations to sell the property. These were unsuccessful and the property was placed on the market. The property sold within a few months. The Commissioner considers the beneficiaries have taken appropriate steps to dispose of the property within a reasonable time. 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 to the sale contract settlement date.