Edited version of private advice

Authorisation Number: 1052230984808

Date of advice: 23 May 2024

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 you to dispose of your ownership interest in the dwelling and disregard the capital gain or capital loss you made on the disposal?

Answer

Yes.

Having considered your 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 ruling applies for the following period:

Year ended XX XXXX 20YY

The scheme commenced on:

XX XXXX 20YY

Relevant facts and circumstances

On XX XXX XXXX, the deceased passed.

The deceased acquired the property before 20 September 1985.

The property was the deceased's main residence at date of death.

The property is greater than 2 hectares in size.

You are seeking the Commissioner's discretion for only 2 hectares of the property including the dwelling.

The 2 hectares in question of the property were not used to produce income.

On XX XXX XXXX, the deceased executed their last will

The will appointed you as executrix to perform the role of administering the estate.

You, Person A, Person B, Person C and Person D were children of the deceased.

You, Person B, Person C and Person D received legacies under the deceased's will.

The will bequeathed the property to you absolutely.

After the deceased passed, the property remained vacant.

On XX XXX XXXX, the Supreme Court granted probate of the will was granted to you.

On XX XXX XXXX, Person A lodged an affidavit to be provided for in the will in the Supreme Court.

On XX XXX XXXX, Person A's solicitors, Firm C commenced proceedings against the estate in the Supreme Court further delaying the administration of the estate.

On XX XXX XXXX, your solicitors, Firm A received correspondence from Person C and Person D's solicitors, Firm B stating the maximum sum their clients would be able to contribute was $XX

On XX XXX XXXX, Firm A offered a settlement of $XX to Person A.

On XX XXX XXXX, Firm C rejected the beforementioned offer and made a counteroffer of $XX plus the return of some equipment.

On XX XXX XXXX, you rejected the counteroffer. Person A made a settlement offer of $XX, to avoid any further delays and costs.

On XX XXX XXXX, Firm B sent correspondence to Firm A stating they did not approve of the draft consent orders.

On XX XXX XXXX, Firm C sent correspondence to Firm A advising that there had been no formal acceptance of the offer made on XX XXX XXXX. Firm C gave the end of business day XX XXX XXXX to accept the offer.

On XX XXX XXXX, Firm A sent correspondence to Firm C stating that they were still in the process of negotiating with the representatives of the other beneficiaries. This meant they could not accept the offer made on XX XXX XXXX.

In XXXX, Firm D sent correspondence to Firm A, stating that they do not agree to the proposed consent order because there was no application before the Court to join Person B to the proceedings.

In the beforementioned letter, Person B stated they were willing to contribute $XX to Person A.

On XX XXX XXXX, Firm A sent correspondence to Person E, who was engaged by Firm A as their Barrister relating to this matter.

On XX XXX XXXX, the Supreme Court issued a consent order, where Person A was awarded a $XX lump sum payment. Half of this amount was payable within 28 days and the balance was payable no later XX XXX XXXX.

The beforementioned order stated that beneficiaries of the deceased's estate agreed to contribute funds back to the estate to fund the payout of Person A.

Despite final judgement orders being issued in XX XXXX, Person B, Person C and Person D continued to disagree on the dollar amounts they were required to reimburse the estate to fund Person A's payout.

On XX XXX XXXX, you sent correspondence to Firm A to pay some estate bills. You did not hear from them for several weeks.

You were not happy with the service standing at Firm A, believing they were contributing to the delay in reaching a resolution. Person E advised you to change solicitors if you were unhappy.

On XX XXX XXXX, you had a meeting with Firm E to engage them as your solicitors.

On XX XXX XXXX, Firm E requested documentation from Firm B.

On XX XXX XXXX, Firm E received correspondence from Firm B discussing the reimbursement to the estate.

In XXX XXXX, a bushfire caused significant damage to the property.

You needed to install new gas lines, hot water systems, water pipes and new water tanks as well as replace lines damaged within the solar bank.

On XX XXX XXXX, you received an email from the Fire Service confirming the property had sustained damages during the bushfires of XXX XXXX and XXX XXXX. This email confirmed that a stage, hay shed, and all fencing were destroyed by the fire.

At this time, you had little financial funds to contribute towards recovery efforts on the property.

You relied on Company A to assist with recovery efforts.

Company A commenced recovery activity on the property in XXXX and during XXXX.

On XX XXX XXXX, Firm E provided a letter supporting your application for relief funding.

On XX XXX XXXX, Firm E sent you a finalised deed of arrangement for your approval. At this time, Person B had failed to reimburse the estate their share.

On XX XXX XXXX, you and Person B signed the deed of arrangement.

Person B agreed to contribute an amount of $XX towards the estate, and partially contribute to the settlement.

Under the deed, you would, within 14 days of the date of the deed, transfer Person B a separate property under the will. Person B would list this property for sale within one calendar month of the transfer and upon settlement of sale, Person B would pay you the sum of $XX.

On XX XXX XXXX, Firm E requested funds from you to complete the transfer to Person B.

On XX XXX XXXX, Company A sent correspondence to you confirming they would return to the property in XXXX to assist with the recovery efforts.

On XX XXX XXXX, Company A sent correspondence to you requesting the fencing numbers required, whether the impacted fence lines have been cleared and whether you have materials to commence the restoration works.

On XX XXX XXXX, the estate transferred the property to you.

On XX XXX XXXX, you were advised the Environment Protection Authority agreed with the regional council to assist residents with the disposal of old/burnt fencing material.

On XX XXX XXXX, Firm E sent correspondence to you apologising for the delay in getting the requested documents to you and provided you with the Supreme Court print out evidencing the orders made.

Around XXX XXXX, the property was advertised for sale.

On XX XXX XXXX, you signed a contract of sale

On XX XXX XXXX, settlement occurred.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195

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