Private ruling: Commissioners discretion - extension of the two year period
Published: July 2013
Ruling period: Year ended 30 June 2013.
Date scheme commenced: 1 July 2012.

Ruling: Question and answer: | 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? | Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. The deceased passed away in 20XX, leaving their main residence. This property was purchased before 1985 as joint tenants with the deceased's spouse. The deceased's spouse passed away in 200X leaving the remainder 50% to the deceased. The deceased therefore has one 50% pre-CGT interest and one 50% post-CGT interest. The property was valued in 200Y for a total capital value. The property was listed for sale in 20YY. The property was the subsequently listed for a number of different prices. A buyer finally signed a contract in 20ZZ for a much lower than originally valued price and settlement was set for sometime later which was before the 2 year cut off date. However, due to the buyer being unable to obtain finance settlement did not occur until after the two year cut off date.

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

Reasons for decision: Summary: Under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) a capital gain or capital loss can be disregarded on the sale of a dwelling acquired from a deceased estate where: · the dwelling was acquired by the deceased before 20 September 1985 or the dwelling was bought after this date and was the deceased's primary residence just before their death and was not used for producing assessable income, and · the dwelling was sold within two years of the deceased's death, or within a longer period allowed by the Commissioner. In this case, the deceased still owned a 50% interest in a pre-CGT asset and it was their primary residence before their death. The dwelling was sold outside the two year period outlined in subsection 118-195(1) of the ITAA 1997. Therefore, the estate will only be able to disregard the capital gain from the sale of the dwelling if the Commissioner grants an extension to the two year time limit. The Commissioner has discretion to extend the two year period in subsection 118-195(1) of the ITAA 1997, where: · 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 (e.g. 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. | Detailed Reasoning - Application to your circumstances:: In this case, every attempt was made to have the property sold before the 2 year time limit. However, the settlement of the contract of sale was delayed due to the buyer being unable to obtain finance. This was outside the control of the trustee or beneficiary's control. Having considered the relevant facts, 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.