Edited version of private advice

Authorisation Number: 1051923629899

Date of advice: 27 November 2021

Ruling

Subject: Commissioner's discretion - inherited dwelling

Question

Will the Commissioner allow an extension of time for you to dispose of your ownership interest in the house and disregard the capital gain you make on the disposal?

Answer

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

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

At some time before 1985, the deceased and their spouse at the time built the house which was the main residence of the deceased until they passed away.

Many years later, but still before 1985, the deceased divorced from their spouse and received sole title of the house.

In mid-20XX, the deceased passed away. The will left the house to four family member beneficiaries. The house remained vacant until the house settled.

A few months later, probate was granted, and the executors began distributing the estate to the beneficiaries as soon as practicable.

From Late 20XX to early 20XX, the family were dealing with grief and were not mentally prepared to sort through belongings. The deceased also had an investment property that required their efforts and attention to dispose of in accordance with the will. The family completed garden maintenance and cleaned the property. The investment property was sold in the 20XX tax year and included in the Estate Tax Return. Shortly after the sale, the family made the decision that they would sell the house and that it was time to sort through the belongings.

This process took an extensive period of time given the accumulation of possessions over many years. The family found it difficult to find time outside of work and other family commitments, with one executor travelling long distance.

In late 20XX, the family cleaned the house, engaged a gardening company for the extensive garden and searched for furniture to be hired from a staging company (as all belongings had now been removed). Once ready for sale, the real estate agent suggested to wait until after Christmas to list the house for sale.

In early 20XX, the house was signed to a real estate agent who booked an auction for mid-20XX. However, stage 3 coronavirus restrictions (4 reasons to leave the house) were imposed for over a month. During these restrictions auctions were not allowed. The real estate agent, in consultation with the family, cancelled the auction. The house remained empty during this time, with no staging furniture and no family members able to visit it under lockdown.

In mid-20XX, Stage 3 restrictions eased, with 4 reasons to leave the house removed, but density limits, limits on people in outdoor spaces of 10 and limits of people within a home of 5 applied. The family decided to wait until the restrictions eased before trying to list the property again given the effort and money required to prepare the house for sale, and the uncertainty of changing restrictions.

Later, restrictions eased again. However, the family was not comfortable with listing the property online for a video auction or tour. Shortly after, restrictions and lockdowns were reintroduced. Restrictions increased and a curfew was added to the lockdown conditions. The family decided that they would wait for some certainty around coming out of lockdown before contacting the agent to list the property again.

In late 20XX, restrictions eased, and the family learned their real estate agent was retiring and that they would have to find a new agent.

In early 20XX, the family decided it was time to sell the house and that there was enough easing of movement for auctions and inspections. They began the process of cleaning up the house inside and out and soliciting a new realtor. Shortly after, the family listed the house for sale with a real estate agent who booked an auction date in mid-20XX. The house was sold at auction and settled just over 12 months after the two-year period expired.

Relevant legislative provisions

Income Tax Assessment Act 1997 subdivision 115-A

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 118-120

Income Tax Assessment Act 1997 section 118-130

Income Tax Assessment Act 1997 section 118-195