Private ruling: The Commissioner’s discretion to extend the two year time limit to dispose of a dwelling
Date of advice: 4 April 2018
Published: June 2018
Ruling period: 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 until the settlement date? | A1: Yes

Relevant facts and circumstances: C acquired a dwelling before 20 September 1985 (the dwelling). C passed away in 20XX (the deceased). The dwelling was the deceased’s main residence, although the deceased was living in a care facility at the time. The deceased’s will appointed C’s children as executors of the deceased’s estate. One child renounced the role of executor. A child of C lodged a caveat against the deceased’s estate, which prevented a grant of probate from being issued. Another caveat was further lodged. A warning against lodging the caveat was served on the child of C. Legal proceedings in relation to the caveat commenced in 20XX. Probate was further delayed due to an incorrect address being on the death notice, which had to be corrected. Probate was issued in relation to the deceased’s estate in 20XX. In 20XX legal proceedings under the Family Provision legislation commenced. Legal proceedings under the Family Provision legislation were settled in 20XX by the parties entering into court orders. A contract was entered into with a real estate agent for the sale and marketing of the dwelling in 20XX. Settlement of the sale of the dwelling occurred in 20XX.

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. Legal action was initiated by a child of the deceased firstly in the form of a caveat that prevented administration of the estate. Further legal proceedings, in the form of proceedings under the Family Provision legislation were commenced in 20XX. These court proceedings resulted in orders being granted by the court in 20XX. Within 3 months of these court proceedings, settlement of the sale of the deceased’s dwelling had occurred. Settlement of the sale of the deceased’s dwelling occurred within 3 years, 2 months following the deceased’s passing. The Commissioner accepts that it is appropriate to grant the short extension that you have requested.