Private ruling: main residence exemption
Published: April 2013
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Will the Commissioner exercise the discretion to extend the two year rule in regards to the disposal of a deceased's main residence? | A1: No


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

Reasons for decision: Summary: Section 118-195 of the ITAA 1997 allows an individual to disregard a capital gain or capital loss made from a Capital Gains Tax event (ie. sale of the property) that happens in relation to a dwelling where: The ownership of the dwelling passed to you as the beneficiary of a deceased person's estate, The deceased person died after 20 August 1996, The deceased acquired the dwelling before 20 September 1985, and The dwelling was the deceased person's main residence just before death. You fit into the above requirements. Therefore, you may be eligible to disregard the capital gains tax if: · you dispose of your interest in the dwelling within two years of the deceased's death, or · the dwelling is your main residence from the date of death until the time your ownership ends. 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. These examples are not exhaustive. 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 you chose not to dispose of the property within two years from the deceased death because you were not ready to make a decision on the property and were unaware of the two year limit. Your delay in selling the property does not fall into any of the examples stated above and was within your control. As such the Commissioner will not exercise his discretion in your case.

Relevant facts: Your parent passed away in 20XX. | Your parent left you and your sibling a small unit. | You were not ready for a long time to make a decision about disposing of your parent's belongs and preparing the property for sale. | After your parent's death the unit was unoccupied and left as it was. | It has been over two years since your parent died. | You were unaware of the conditions of Section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997)