Private ruling: Capital gains tax and deceased estate
Date of advice: 22 September 2016
Published: November 2016
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Question and answer | Will the Commissioner Exercise 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? | Yes.

Relevant facts and circumstances: The deceased passed away a number of years ago. The property was the main residence of the deceased prior to the date of death, and the property was not used to gain or produce assessable income after the date of death, The property was sold in the 20XX income year. Due to the manner and suddenness death of the deceased a delay in selling the property occurred. The beneficiaries have experienced an extended period of grieving and are seeking professional assistance.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-130. | Income Tax Assessment Act 1997 Section 118-195.

Reasons for decision: Summary: When a person inherits a deceased person's dwelling, they may be exempt or partially exempt when a capital gains tax (CGT) event happens to it (for example, they sell it). Where the dwelling is sold within two years of the deceased's death, the trustee or beneficiary can disregard the, capital gain or capital loss resulting from the sale. A trustee or beneficiary of a deceased estate may apply to the Commissioner to grant an extension of the two year time period, where the CGT event happens in the 2008-09 income year or later income years. Generally, the Commissioner would exercise the discretion in situations where the delay is due to circumstances which are outside of the control of the beneficiary or trustee, for example: • 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. In exercising the discretion the Commissioner will also take into account whether and to what extent the dwelling is used to produce assessable income and for how long the trustee or beneficiary held the ownership interest in the dwelling. In your case the delay in selling the property was due to the manner and suddenness death of the deceased. There has been an extended period of grieving and the beneficiaries are receiving professional assistance with the grieving process. For these reasons, the Commissioner will exercise his discretion to allow an extension to the two year time period.