Edited version of private advice

Authorisation Number: 1051921663482

Date of advice: 11 January 2022

Ruling

Subject: CGT - deceased estate

Question

Will the Commissioner allow an extension of time for you to dispose of your ownership interest in the dwelling and disregard the capital gain or loss you made on the disposal?

Answer

No.

This ruling applies for the following period:

30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The deceased acquired the property post 20 September 1985.

The deceased passed away on XX/XX/XXXX.

The property was the deceased's main residence at the time of their death and was not then being used for the purpose of producing assessable income.

Probate was granted on XX/XX/XXXX to the deceased's appointed executor.

The executor did not administer the estate in accordance with the terms of the will and did not sell or otherwise distribute the inherited dwelling to the residuary beneficiaries.

On XX/XX/XXXX The Supreme Court of X revoked the executor's grant of probate and a new representative was appointed as administrator of the estate.

There was a further significant period of delay before the property was sold due to actions taken in an attempt to improve the sale price.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 118-195(1)

Reasons for decision

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 outlines the factors that the Commissioner will consider when determining whether or not to exercise their discretion to extend the two-year period under section 118-195 of the Income Tax Assessment Act 1997. Generally, the Commissioner will allow a longer period where the sale of the dwelling could not be settled within two years of the deceased's death due to reasons beyond your control.

In considering whether to extend the two-year period all the factors both in favour and against the granting of the Commissioner's discretion must be considered.

It is noted that the original executor did not administer the estate in accordance with the will and was subsequently removed. However, once you were appointed administrator of the estate and gained title to the property, it was within your control to sell the property. We can understand that you and the beneficiaries wished to achieve a higher sale price. However, it was still possible to sell the property without taking the actions that resulted in the further delay.

PCG 2019/5 states that delays due to trying to achieve a higher sale price, such as waiting for the market to improve or refurbishing the property, would weigh against the exercise of the discretion.

We have considered all your circumstances and as there was a significant period of delay that was not outside of your control, the Commissioner will not exercise the discretion to grant an extension of time.

Therefore, any capital gain made on the property from the date the deceased passed away until the property was disposed of will be subject to tax. That is, the first element of your cost base for the property is its market value on the deceased's date of death. You are also entitled to the 50% CGT discount in relation to the property.