Private ruling: Capital Gains Tax - Deceased Estate
Published: March 2015
Ruling period: Year ending 30 June 2015.
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.

Relevant facts and circumstances: The deceased passed away in the relevant financial year. X was appointed Executor of the Will. A copy of the Will was provided to you by X in the beginning of the 2013-14 financial year. You were bequeathed the deceased's property (the property). The property was the deceased's main residence and was not used to produce assessable income. You enquired about the progress of the estate with the Executor and the Solicitors that the Executor engaged on several occasions, to no avail. You also sought advice from a local community legal service in an attempt to gain an understanding of how matters of the estate progressed. A Notice of Intention to Apply for Grant was published in the local newspaper towards the end of the 20XX financial year. Probate was granted at the end of the 20XX financial year. You received the Title Deed to the property in the 201YY financial year. The Executor refused to provide you with the keys to the property and you had to have new locks installed in the 20YY financial year. The Solicitors engaged by the Executor reimbursed you the full amount you incurred in installing the new locks in the 20YY financial year. The property was scheduled to go to auction towards the end of the 20YY financial year, however the property was sold and contracts signed prior to the property going to auction. Settlement date is set for the end of the 20YY financial year.

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

Reasons for decision: Summary: Subsection 118-195(1) of the ITAA 1997 allows a trustee or beneficiary 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 Executor of the Will and the Solicitors engaged by the Executor did not progress matters of the estate in a timely matter. This was outside of your control. Your numerous enquiries about the progress of the estate matters were ignored. Transfer of the property took over two years from date of death. The property was the deceased's main residence and to your knowledge has never been used to produce assessable income. 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.