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Will the Commissioner exercise his discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the period of disposal of the beneficiaries' ownership interests in the dwelling situated at XXXX (the "Property"), such that the capital gain made on the disposal of those ownership interests is disregarded?

Yes. This ruling applies for the following period : Year ended 30 June 20XX The scheme commenced: X XXXX 20XX

The Property was the main residence of the deceased persons, Persons 1 and 2. The Property was purchased on XX XXXXX XXXX by Persons 1 and 2. Persons 1 and 2 held the Property with a 50% ownership interest each, as tenants in common. Person 1 died on X XXXX 20XX and their 50% share in the Property passed under their will (the "Will") to their and Person 2's children (the "beneficiaries"), with each beneficiary receiving X share each of ownership of the Property at this time. Clause 4.2 of the Will granted a right of residence/ life tenancy in favour of Person 2. Clause 4.4 of the Will granted an express personal right of occupation in relation to any residence forming part of the residence to Person 2. Person 1's Will was dated XX XXXXX 201X and probate was granted on X XXXX 20XX to the beneficiaries. The executors and trustees of Person 1's estate were the beneficiaries. Person 1's interest in the Property was transferred to the names of the beneficiaries as joint tenants two weeks following grant of probate. Persons 1 and 2 were not living apart or permanently separated at Person 1's death, and they were not excluded foreign residents at any relevant time.

Ownership of the Property was registered in the names of Person 2, as to 50% as a tenant in common, and in the names of the beneficiaries as joint tenants, as to the remaining 50% ownership. You advised that Person 2 had lived in the Property as their main residence since acquisition and along with their right to reside until their death, these factors made it difficult for the beneficiaries to sell either the whole Property or their 50% share in it. Person 2 continued to reside in the Property until they died on XX XXXXX 202X when their 50% ownership interest in the dwelling passed under their will (the "Will") to his and Person 1's children, the beneficiaries - their individual share X of the Property from Person 2's 50% share. Person 2's Will was dated XX XXX 202X and probate was granted to the beneficiaries on X XXXX 202X. The Property had to be cleared of all personal belongings and other items and equipment before it could be put on the market. The first open inspection was on X XXXXX 202X followed by inspections one and two weeks later, then an on-site auction a week after the third inspection. The Property was sold on X XXXXX 202X.

The process of transmitting Person 1's interest into the beneficiaries' names was completed before settlement. The transferors in relation to the sale of the Property were the beneficiaries. The sale of the Property was settled on XX XXXX 202X, which was less than two years after Person 2's passing. The Property was unoccupied from the date of Person 2's passing until the Property was sold. You submitted the following copies of documents to confirm the facts you provided in the ruling application: •                The last Will and testament of Person 1 •                The last Will and testament of Person 2 •                Memorandum of property transfer to Persons 1 and 2 from transferor •                A schedule of the activities carried out to sell the property which include dates of open inspections and date of auction of the Property •                A foreign resident capital gains withholding clearance certificate dated XX XXXXX 202X in the name of one of the beneficiaries for the clearance certificate period of X XXXX 202X to X XXXX 202X

•                Land Registry Transfer New South Wales Real Property Act 1900 dated XX XXXX 202X naming the transferors (the beneficiaries).

Income Tax Assessment Act 1997 Subdivision 118-B Income Tax Assessment Act 1997 section 118-195 Income Tax Assessment Act 1997 subsection 118-195(1)

The main residence exemption in Subdivision 118-B of the ITAA 1997 applies to disregard a capital gain or capital loss a taxpayer makes from a CGT event that happens to a dwelling that is their main residence. Special rules apply if the taxpayer is an individual and their ownership interest in the dwelling passes to them as a beneficiary in a deceased estate, or they own it as trustee of a deceased estate. Where you are an individual and your ownership interest passed to you as a beneficiary, or as a trustee of a deceased estate, you will be eligible for a full main residence exemption on disposal, where the following conditions are met: The deceased acquired the ownership interest on or after 20 September 1985 and the dwelling was the deceased's main residence just before their death and was not then being used for the purpose of producing assessable income and, • Your ownership interest ends within two years of the deceased's death, or a longer period allowed by the Commissioner; or •

The dwelling was from the deceased's death until your ownership interest ends, the main residence of one or more of the people mentioned in item 2, column 3 of subsection 118-195(1) of the ITAA 1997. The deceased acquired the ownership interest before 20 September 1985 and, • Your ownership interest ends within two years of the deceased's death, or a longer period allowed by the Commissioner; or • The dwelling was from the deceased's death until your ownership interest ends, the main residence of one or more of the people mentioned in item 2, column 3 of the table in subsection 118-195(1) of the ITAA 1997: -               the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or -               an individual who had a right to occupy the dwelling under the deceased's will; or - if the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary - that individual. Application to your circumstances

In this case, the beneficiaries' ownership interests in the Property were inherited from Person 1 when they died and then from Person 2 when they died. The Property was the main residence of Persons 1 and 2 from the date of purchase until the day they died. Portion of ownership interests inherited from Person 1 Person 1's 50% interest was acquired as a tenant in common with Person 2 prior to the introduction of capital gains tax (CGT) on 20 September 1985. Person 1 died in 20XX and their 50% interest in the Property passed to their children, the beneficiaries, in equal shares (X each of the Property) as a post CGT interest. The beneficiaries disposed of the ownership interests they inherited from Person 1 on XX XXXX 202X when the sale of the Property was settled, several years following Person 1's death and outside of the two-year period of time allowed. However, subsection 118-195(1) ITAA 1997 provides that the main residence exemption will apply where the dwelling was, from the deceased's death until the beneficiaries' ownership interest ends (in this case, the settlement on the sale of the Property), the main residence of one or more of the people mentioned at item 2, column 3.

Person 2 was both the spouse of Person 1 immediately before their death (and not separated or living apart permanently from her), and an individual who had a right to occupy the dwelling under their Will, until their death. That is, Person 2 qualified as a person under both (a) and (b) of item 2 in column 3 until they passed away. Person 2 resided in the Property until their death on XX XXXXX 202X and the sale of the Property was settled less than two years later. Given Person 2 passed away before the Property was sold, it was not their main residence from Person 1's death until the beneficiaries' ownership interests in the Property ended on XX XXXX 202X. That is, Person 1 did not qualify as a person under (a) or (b) for the whole period until XX XXXX 202X as they passed away before the property was sold and settled. Consequently, the beneficiaries require an extension of time for the period from XX XXXX 202X to XX XXXX 202X with respect to the portion of their ownership interests that they inherited from Person 1. In these circumstances it is considered appropriate to allow an extension of time.

Therefore, the beneficiaries will be eligible for a full main residence exemption on the disposal of their 50% interest which passed from Person 1. Portion of ownership interests inherited from Person 2 The beneficiaries' 50% interest (X share of the Property) which passed from Person 2 is also eligible for the full main residence exemption on disposal of the Property as it was sold within two years of Person 2's death.