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Will the Commissioner exercise 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?

No. This ruling applies for the following period : DD MM 20YY The scheme commenced on: DD MM 20YY

The deceased passed away on DD MM 20YY. The dwelling is located at XX (the property). The deceased purchased the property on DD MM 20YY and moved in immediately after purchase. The deceased's spouse passed away some years before this property was purchased. The deceased acquired their interest after 20 September 1985. The property was the main residence of the deceased just before they passed away and was not used to produce assessable income at that time. The property was situated on less than two hectares of land. The deceased had a Will which was dated DD MM 20YY. The deceased's original Will appointed their spouse to be the Executrix of the Will and Trustee of the Estate. The deceased bequeathed the whole of their estate to their said spouse PROVIDED that should their spouse fail to survive their death by thirty clear days THEN they appoint their adult children to be the Executors of this Will and Trustees of the Estate. The application for probate was delayed due to the belief that it could not be applied for until at least a year after the deceased's passing. Probate was granted on DD MM 20YY. The property was listed for sale on DD MM 20YY.

On DD MM 20YY, a buyer made an offer on the property of $X subject to the selling of their own property and building and pest inspection. This offer was declined due to having to rely on the sale of the buyer's property. On DD MM 20YY, an offer of $X subject to building and pest inspection and sale of their property. This offer was also declined. On DD MM 20YY, the real estate agent advised they had taken buyers through the home and these buyers had made offers made on the property. Buyer Number 1 offered $X, subject to building and pest inspection (14 days); no finance required. They have just accepted an offer on their property and are expecting an unconditional contract of sale in the next week or so. Buyer Number 2 offered $X with no conditions and 90 day settlement or earlier if required. Buyer Number 1 increased their offer to $X with the original conditions. The offer from Buyer Number 2 of $X with no conditions and the 90 day settlement. Settlement occurred on DD MM 20YY. Between the time of the deceased's the death and probate being granted the property remained vacant, with the building being maintained in readiness for sale.

The property sale settled more than two years after the deceased's death.

Income Tax Assessment Act 1997 section 118-195

A capital gain or capital loss may be disregarded where a CGT event happens to a dwelling if you owned it as the trustee or beneficiary of the deceased estate. For a dwelling acquired by the deceased after 20 September 1985, that was the deceased's main residence and not used to produce assessable income just before their death, you will be entitled to a full exemption if your ownership interest ends within two years of the deceased's death. You have an ownership interest in a property if you have a legal interest in the property. This means that if you sell a property, your ownership interest continues until the date of settlement (rather than the date the contract of sale is signed). Practical Compliance Guideline PCG 2019/5 Capital gains tax and deceased estates - the Commissioner's discretion to extend the two-year period to dispose of dwellings acquired from a deceased estate provides guidance on factors we consider when deciding whether to grant the discretion.

Paragraph 3 of the PCG 2019/5 provides that we will allow a longer period where the dwelling could not be sold and settled within two years of the deceased's death due to reasons beyond your control that existed for a significant portion of the first two years. Paragraph 11 states during the first 2 years after the deceased's death, more than 12 months was spent addressing one or more of the circumstances described in paragraph 12 of this Guideline. Paragraph 12 states one or more of the following circumstances must have taken more than 12 months to address: •                     the ownership of the dwelling, or the will, is challenged •                     a life tenancy or other equitable interest given in the will delays the disposal of the dwelling •                     the complexity of the deceased estate delays the completion of administration of the estate •                     settlement of the contract of sale of the dwelling is delayed or falls through for reasons outside of your control, or •                     restrictions on real estate activities imposed by a government authority in response to the COVID-19 pandemic.

Paragraph 14 of PCG 2019/5 explains we weigh up all of the factors (both favourable and adverse). Paragraph 17 of PCG 2019/5 provides a list of other factors that may be relevant to the exercise of the Commissioner's discretion which includes the sensitivity of your personal circumstances. Application to your circumstances The deceased acquired the dwelling on DD MM 20YY.When the deceased passed away, the property passed to you as Executors and Trustees of the Estate. You have advised it took more than 12 months addressing the completion of the estate administration. There was a delay in making an application for probate, the deceased passed away on DD MM 20YY, the probate application was started in MM 20YY with probate being granted on DD MM 20YY; the property was listed for sale on DD MM 20YY. There were two offers to purchase the property were made and declined; the first offer of $X was declined due to the buyer being dependant on selling their own property and the second offer of $X was declined for the same reason furthermore you would be expecting an offer above the amount proposed if the buyer found themselves in a position to make a more unconditional offer.

Three more offers were made on the same day, the first of $X subject to building and pest inspection, no finance and the expectation of an unconditional sale on their property in the next week; the second of $X had no conditions and suggested a 90 day settlement or sooner if required. The third of $X (increase by buyer on first offer) with the original conditions. The offer of $X was accepted with settlement occurring on DD MM 20YY. The property sale settled more than two years after the deceased's death. Therefore, you require the Commissioner's discretion to extend the two-year period to be eligible for an exemption. Conclusion In this case, there has been no challenge to the will, the estate was not complex, there were no unforeseen or serious personal circumstances that prevented the sale, and the delay in selling the property is not due to circumstances beyond the beneficiary or trustee's control.

While we appreciate your circumstances, however the property was listed for sale on DD MM 20YY; there was an offer made on within DD MM 20YY (approximately one week later) which was declined, the next offer was received on DD MM 20YY (approximately five months after the first offer) this was also declined. The offer which was accepted was made on DD MM 20YY (approximately ten months after the property was listed for sale). The delay in the sale of the property was not caused by any of the circumstances described in paragraph 12 of the guideline. The information and documentation provided does not support that the deceased's estate was of a complex nature. Therefore, this is not a factor that the Commissioner would take into consideration when making the decision on whether to exercise the discretion to extend the two-year period to dispose of the property. The Commissioner's discretion is meant to be limited to situations where the owner is effectively prevented from selling the property. The intention of the two-year period is to allow the orderly and timely sale of deceased estate property.

Having considered the relevant circumstances, the Commissioner will not exercise his discretion and extend the 2 year time limit. Therefore, the normal CGT rules will apply to the disposal of the property. You should note that the first element of your cost base for the property is its market value on the deceased's date of death. You are also entitled to the 50% CGT discount in relation to the property.