Edited version of private advice

Authorisation Number: 1052258350144

Date of advice: 7 June 2024

Ruling

Subject: Commissioner's discretion - deceased estate

Question

Will the Commissioner exercise the discretion under section 118-195 of 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 and 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 30 June 20XX

The scheme commenced on:

XX XX 20XX

Relevant facts and circumstances

The deceased passed away on XX XX 20XX.

At the time of the deceased's passing, the deceased owned a property located at X XX XX (the property).

The deceased purchased a block of land in the 19XX and built the property in the 19XX's.

The property was the main residence of the deceased until their passing.

The property was never used for the purpose of producing income during the deceased ownership.

The property is less than 2 hectares in size.

XX is the grand-child of the deceased; XX is xx years old and is dependent on their parents due to personal and sensitive issues.

XX is unable to care for themselves and requires a full-time career.

Within the deceased's will the deceased provides funds for XX's benefit with the executors empowered to make the decision that would best suit XX and their current and future needs.

During XX 20XX, time was spent addressing the best way to support the wishes of the deceased and benefit XX. The executors and XX decided that the most enduring benefit for XX would be to extend their main residence by constructing an independent living area for XX which would be funded by the sale of the deceased's main residence.

Probate was granted on XX XX 20XX to the executors.

In XX 20XX you decided to engage a builder. During this time, you experienced delays caused by Covid-19.

In XX 20XX you approached your accountant with concerns about not meeting the 2 year CGT requirements. Your accountant lodged a private ruling application. The private ruling was not accepted as the property was not yet sold.

In XX 20XX, correspondence received from the ATO via your accountant gave you hope that your concerns could be recognised. This helped frame your considerations of pursuing the build at this point in time.

In XX 20XX, you terminated your association with your builder for the following reasons:

•         Frustrations with their process and delays.

•         Their admission to having internal company problems.

•         Issues with securing building products.

In XX 20XX you accepted another builder's proposal.

In XX 20XX the house plans were approved by your council.

Due to your builder's schedule, they could not commence your renovation until the end of XX 20XX. They informed you that you would need to vacate your property for the extensive work to be completed.

In XX 20XX you arranged small repairs to XX XX to make the home liveable.

In XX 20XX you moved from your home to XX XX. The main reasons for your move were:

•         It was a familiar home and space for XX to live in so the renovation transition could be a calm and stable one for them.

•         XX does not cope well with stress, so keeping things familiar and as visually normal as possible were your priorities for XX and their mental health.

On XX XX 20XX your builder commenced the renovations.

In XX 20XX your builder completed the building component of the renovation.

From XX to XX 20XX the remaining tasks of painting, electrical and flooring, and kitchen and bathroom works were completed.

On XX XX 20XX you moved back into your renovated home which provided a more independent living situation for XX.

A contract to sell the property was entered into on X XX 20XX.

The property was settled on XX XX 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195

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