EXTENSION OF TWO-YEAR PERIOD TO DISPOSE OF DWELLINGS ACQUIRED FROM A DECEASED ESTATE – DISREGARDING CGT

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If you dispose of an interest in a dwelling that passed to you as an individual beneficiary or the trustee of the deceased's estate within two years of the deceased's death, any capital gain or loss you make on the disposal is disregarded. 

However, new draft Practical Compliance Guideline PCG 2018/D6 proposes that under certain conditions the ATO may extend this two-year period. The PCG therefore provides a safe-harbour to tax payers whereby they can safely rely on their tax position provided they met the conditions contained in the PCG.

The ATO will allow an extension of the two-year period if the dwelling could not be sold 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. 

To qualify for this safe-harbour, you must meet all the following conditions:

  1. more than half of the first two years after the interest in the dwelling passed to you was spent addressing one or more of the “favourable” factors.  In addition, the dwelling was listed for sale as soon as practically possible after those circumstances were resolved (and the sale was actively managed to completion)

  2. the sale completed (settled) within six months of the dwelling being listed for sale

  3. the “unfavourable” factors were immaterial to the delay in disposing of your interest, and

  4. the longer period for which you would otherwise need the discretion to be exercised is no more than 12 months.

Favourable factors that would work in favour of the extension include challenge of ownership of dwelling, life/equitable interest given in the will delays dwelling’s disposal or that the complexity of the deceased estate delays the administration completion.  Unfavourable factors include waiting for property market to pick up before selling or delays due to refurbishment to improve the sale price.

Once finalised the PCG will have retrospective application as well. No formal application is necessary as taxpayers will self-assess qualification for the extension. 

Please contact our office if you wish to discuss this further.