Private ruling: two year exemption from capital gains tax for a deceased main residence
Date of advice: 31 July 2019
Published: September 2019
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ending 30 June 20XX

Ruling: Q1: Will the Commissioner exercise his discretion under 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. Having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time.

Relevant facts and circumstances: The deceased's lived in their main residence until they passed. This was a single dwelling less than two hectares in size and was never used for investment purposes. The deceased's last will appointed their child executor and trustee of the will. The deceased's second child was appointed substitute executor and trustee of the will. The will stated the executor was to 'apply the whole of the income or capital of the estate to which any beneficiaries are entitled, either absolutely or otherwise, for his her or their maintenance, education or benefit in any manner determined by' them. When it came time to sell the dwelling it was in a neglected state of disrepair, and contained many years of accumulated clutter. To clear the property for sale, it took a lot longer than initially expected. Through the two years there were numerous setbacks getting the property ready for sale. It was extremely daunting at times and overwhelming when you came to realise the enormity of maintenance preparation needed, to present the house to a standard that would be reasonably expected for sale. You undertook minor repairs to make the dwelling at a sellable state and made no improvements to the property. The major repairs that was undertaken was due to a water leak being detected in the ceiling cavity, requiring the services of various tradesperson to fix the leak, repair damaged areas and paint effected parts of the ceiling. Also, within the two year period you required a number of medical treatments in a twelve month period. While you recovered from the treatments you were not able to drive a car or lift anything heavy for several months. This set back added to the stress of clearing the property for sale. Also in the two-period, you managed finally to have the property ready for sale when an unexpected problem occurred. A concealed water leak was discovered within the kitchen walls. You hired a professional to rectify the problem, and water gushed out of the pipe causing internal damage to the kitchen, cabinetry and surrounds. You were instructed by the professional to make an insurance claim to fix the water leak damage. The insurance company firstly rejected the claims to repair the damage. After several phone calls and many weeks later they accepted the claim, which involved replacing most of the kitchen. Approval was granted late in the year, you were notified it could take up to several months to complete the repairs, as the availability of tradesman was low due to it being a busy time of the year. You have provided documentation of the extensive repairs that were undertaken to resolve the damage from the water leak. Once the repairs were complete the property was immediately put on the market for sale. The property settled in the 20XX-XX financial year, with the setbacks this fell out of the two year period by under twelve months.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subdivision 115-A | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 118-195