Edited version of private advice

Authorisation Number: 1052156903109

Date of advice: 22 August 2023

Ruling

Subject: Commissioner's discretion - deceased estate

Question

Will the Commissioner exercise the discretion under section 118-195 of the Income Tax Assessment Act 1997 to allow an extension of time for the Administrator to dispose of the ownership interest in the dwelling owned as trustee of the deceased estate and disregard the capital gain or capital loss made on the disposal?

Answer

Yes. Having considered all the circumstances and the relevant factors the Commissioner will allow an extension of time. Further information about the Commissioner's discretion can be found by searching ato.gov.au for 'QC 66057'

This private ruling applies for the following period:

Year ended XX XXXX 20XX

The scheme commences on:

XX XXXX 20XX

Relevant facts and circumstances

The Deceased passed away on XX XXXX 20XX.

The Deceased's Last Will and Testament (Will) dated XX XXXX 20XX, named an Executor of the Deceased's estate (Estate).

Under the Will, the residue of the Estate is to be divided between Relative 1 and Relative 2.

The main asset of the Estate was the Property. The Deceased acquired the Property in 19XX. The Property is less than two hectares in size.

The Property was the Deceased's main residence at the time of passing and was not then being used to produce assessable income.

The Executor failed to act in that role and did not apply for probate.

The Executor did not immediately renounce the Executor role so the Estate could be administered by someone else.

The Executor signed the renunciation document with the Court dated XX XXXX 20XX.

The Estate and both beneficiaries were impecunious

A notice of intent to apply for Letters of Administration with the Will was advertised on XX XXXX 20XX. The fee was paid by Relative 2's solicitor.

The administration documents could not be lodged without the original Will and Certificate of Death, which were held by the prior solicitors. Relative 2's solicitor paid their account.

Application for probate was lodged on XX XXXX 20XX. The probate filing fee was paid by Relative 2's solicitor.

Letters of Administration were granted to Relative 2 on XX XXXX 20XX by the Court.

There is no appropriation clause in the Will.

There is no right to reside granted under the Will.

Titles Registration Confirmation Statement shows status of the title on XX XXXX 20XX as the registered owner of the Property is Relative 2 as Personal Representative.

Relative 1 had been residing in the Property with the Deceased at the time of passing and under an informal arrangement with Relative 2 as the Administrator, continued to do so.

Notice to Leave under the Act was issued by Relative 2 as Administrator to Relative 1 on XX XXXX 20XX, seeking for him to vacate the Property by XX XXXX 20XX.

Relative 2 engaged a real estate agent to list the Property for sale in XXXX 20XX but had not been able to proceed with the sale process due to Relative 1 not having vacated.

Relative 2 filed a claim at a Court on XX XXXX 20XX. The application was heard and an order made on XX XXXX 20XX. The order includes:

•                     The Residential tenancy agreement between the parties be terminated on XX XXXX 20XX on the grounds of Failure to Leave

•                     A Warrant of Possession to issue authorising a police officer to enter the Property.

After Relative 1 vacated the Property, Relative 2 attended the Property in the presence of police in or about early XXXX 20XX.

The Property was left in a deplorable state. Photos were provided showing the state of the Property when Relative 2 entered the Property in XXXX 20XX.

At this time, Relative 2 was homeless and had been living out of their car for over a year.

Relative 2 attended to cleaning up the Property.

Every visit made to the Property had to be made chaperoned due to fear of Relative 1's possible actions and fear for their own safety.

A Tax Invoice dated XX XXXX 20XX for a skip bin was provided.

A storm event in XXXX 20XX caused flood damage to the Property.

The internal roof space was flooded, with water damage through the walls. The upstairs bathroom waterproofing was insufficient, causing internal damage. As the guttering had not been cleaned out water damage occurred, with water cascading down the sides of the dwelling. The ceiling of the loungeroom and kitchen became bowed and mouldy from water damage.

The Property was not insured.

Relative 2 remained in contact with the real estate agent throughout the period and had them walk through the Property to informally advise the necessary items to repair to enable sale of the Property. Relative 2 was advised it would cost approximately $X to fix the Property to a saleable condition.

Relative 2 funded the clean-up and necessary repairs personally from limited means. Relative 2 and friends fixed and cleaned the Property, including scrubbing off mould and arranging skip bins and removalists to take any remaining bulky items.

None of the work constituted improvements, only repairs necessary to bring the Property to saleable condition.

Photos of the clean-up and general rubbish removal were provided for the period XX XXXX 20XX to XX XXXX 20XX.

Photos were provided at the time of the removalists on XX XXXX 20XX.

On or about XX XXXX 20XX, Relative 2 engaged the real estate agent again to list the Property for sale.

The Property was advertised for sale in XXXX 20XX. The Property was sold for $X by contract dated XX XXXX 20XX. Settlement occurred on XX XXXX 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195

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