The Australian Tax Office (ATO) has issued a Practical Compliance Guideline (PCG) relating to the disposal of dwellings acquired from a deceased estate.
PCG 2019/5 outlines the factors that the ATO considers when deciding to extend the two-year period to disregard capital gains for disposal of a dwelling acquired from a deceased estate as well as the safe harbour compliance approach.
To qualify for the safe harbour, all of the following conditions must be satisfied:
- during the first two years, more than 12 months were spent addressing circumstances such as:
- ownership of dwelling or the will being challenged,
- a life or other equitable interest in the will delays the disposal of the dwelling,
- the complexity of the estate delaying administration of the estate, or
- delays in the settlement of the contract or falls through outside of the beneficiary’s control.
- the dwelling was listed for sale as soon as practically possible after the circumstances above were resolved
- the sale is settled within 12 months of the dwelling being listed for sale
- certain circumstances around the disposal cannot have a material effect on the delay, such as:
- property market prices,
- delays from refurbishing,
- inconvenience on the part of the trustee or beneficiary to organize the sale, or
- unexplained periods of inactivity by the executor in the administration of the estate.
The ATO will also consider the following factors when considering exercising discretion to extend the two-year period:
- the sensitivity of personal circumstances,
- the degree of difficulty in locating all beneficiaries to prove the will,
- any period the dwelling was used to produce assessable income, and
- the length of time the ownership interest is held
Australian Tax Office: Practical Compliance Guideline PCG 2019/5, The Commissioner's discretion to extend the two year period to dispose of dwellings acquired from a deceased estate, 27 June 2019