Edited version of private advice

Authorisation Number: 1052405985653

Date of advice: 17 June 2025

Ruling

Subject: Capital gains tax - deceased estate

Question

Will the Commissioner exercise the discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 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 ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased passed away in mid-to-late 20XX.

As at the date of their death, the deceased owned a property (the property).

The property was the main residence of the deceased just before they passed away and was not then used to produce assessable income.

The property is less than 2 hectares.

The Will of the deceased specified appointed executors as follows:

   Child 1 of the deceased (Person 1)

   Child 2 of the deceased (Person 2)

   Grandchild 1 of the deceased (Person 3) and

   Another relative of the deceased (Person 4)

Following the death of the deceased, there were lengthy delays in obtaining grant of probate, due to time involved in responding to requisitions issued by the court surrounding spelling of the names of the beneficiaries as stated in the terms of the will as against their birth and married names.

Probate was eventually granted by the court in mid-20XX (over 18 months after the deceased passed away), but only to Person 1, Person 3, and Person 4, as Person 2 predeceased the deceased.

For security purposes following the death of the deceased, family and friends occupied the property and paid the utilities up until mid-20XX (a short time after probate was granted), when the property became vacant following the conclusion of Family Provision proceedings involving the Estate of Person 5. Person 5 was the child-in-law of the deceased and spouse of Person 2.

Under the terms of the deceased's will, a life interest was provided in favour of the Person 1 and Person 2.

Therefore, the estate property was to be retained during the lifetime of both Person 1 and Person 2, with persons entitled in remainder being the grandchildren of the deceased, as designated in the terms of the Will of the late Person 2.

Person 2's children of their second marriage to the late Person 5 were entitled in remainder on the death of Person 1.

Estate of the late Person 5 (and effect on the administration of the deceased's estate)

Person 5 passed away in early 20XX.

There were some inter-related issues between the estate of the late Person 5 and the deceased's estate, with Person 5's child (Person 6) making a family provision claim against the estate of the late Person 5.

The family provision claim commenced in the supreme court in early 20XX.

The two executrices of the will of the late Person 5 (Person 1) and the child of the late Person 5 (Person 7) filed two affidavits in reply to affidavits lodged by Person 6.

Person 6 did not file any affidavit in reply or respond to the affidavits filed by Person 1 and Person 7.

In mid-20XX a return date of a notice of motion was filed by Person 6.

After this, an order was made by the court for Person 6 to discontinue the proceedings for the claim.

Progression towards the sale of the property

No agent was engaged by the executors for the sale of the estate property of the deceased, however initial appraisals were obtained in mid-20XX, with the following recommendations:

   Low market value $X

   Medium market value $X

   High market value $X

Local real estate agents were approached for potential marketing and sale of the property from mid-20XX to mid-to-late 20XX.

Upon the property becoming vacant it was determined some work needed to be undertaken.

Following this, the 3 surviving executors of the deceased's Will (Person 1, Person 3, and Person 4), along with the family, made the decision for the property to be sold, rather than being retained for the lifetime of the surviving life tenants, Person 1, and then on their death to the remainder grandchildren.

In late 20XX repairs and renovations were carried out at the property by the deceased's family in expectation of it being marketed for sale or for lease in accordance with the terms of the deceased's will. These repairs and renovations were minor in nature and included painting, maintenance to the roof, minor electrical work, and some cleaning. These were carried out up until the property was sold.

In late 20XX the family members agreed for the property to be sold to a named grandchild of the deceased (Grandchild 2, a remainder person in the Will) for $X.

A contract was exchanged in late 20XX for the property sold to Grandchild 2 by the executor/ trustee of the deceased estate in late 20XX, with settlement occurring in early 20XX.

Grandchild 2 was separately represented and paid stamp duty and their own legal costs.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 118-195

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