Private ruling: Capital gains tax - deceased estate - 2 year discretion
Date of advice: 6 April 2018
Published: June 2018
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? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 subsection 118-130(3) | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision: Summary: The Commissioner will exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time. | Detailed Reasoning - Detailed reasoning: The capital gains provisions allow for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person’s estate sell that dwelling within two years of the date of death. Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was: ● Acquired by the deceased before 20 September 1985, or ● The deceased’s main residence when they died. The Commissioner has the discretion to extend the two year period. This extension is generally only granted where the executors are merely arranging the ordinary sale of the dwelling and the cause of the delay is beyond their control (for example, if the will is challenged). There must not be any other factors mitigating against exercising it. In your case, the delay in disposing of the dwelling was due to the will of the deceased being challenged. This delay prevented you from disposing of the dwelling within the two year time limit. The Commissioner accepts that it is appropriate to grant the short extension that you have requested. | Detailed Reasoning - Note:: The exemption only extends to the dwelling plus two hectares of adjacent land. Any land that exceeds two hectares will be subject to capital gains tax provisions.

Relevant facts: The deceased acquired a dwelling (the dwelling) | The deceased passed away in 20XX (The deceased) | The dwelling was the deceased’s main residence. | The dwelling is situated on land greater than 2 hectares. | The deceased was survived by a number of beneficiaries. | A dispute arose between the beneficiaries in relation to the will of the deceased. | The dispute was resolved by a formal agreement being entered into in 20XX between all of the beneficiaries. | The dwelling was prepared for sale after the agreement was entered into. | Settlement occurred a short time later.