Edited version of private advice

Authorisation Number: 1051950487403

Date of advice: 17 February 2022

Ruling

Subject: Commissioner's discretion - deceased estate

Question 1

Will the Commissioner allow an extension of time for you to dispose of Property Interest A 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.

Question 2

Is any capital gain you make on the disposal of Property Interest B disregarded?

Answer

No. You do not qualify for a full or partial exemption from capital gains tax (CGT) on disposal of Property Interest B as you acquired it after 20 September 1985, and it was never the deceased's main residence during your ownership period.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

At some time before 1985, the deceased and their spouse jointly acquired the property (Property Interest A). The property was used as their holiday home, it was never the deceased's main residence and was never used to generate income.

At some time after 1985, the deceased's spouse passed away and the deceased inherited their share of the property (Property Interest B).

A couple years later, the deceased passed away. The deceased's two children (Co-executors) jointly inherited the property. Shortly after, probate was granted.

A few months later, the Co-executors decided to sell the property and their conveyancer advised to change the title into their names. Shortly after, the title was transferred to the Co-executors, who started to prepare property for sale. The 100+ year-old house needed considerable structural work and painting to prepare for sale.

In late 20XX, fires started in XXXX NSW and spread to XXXX Victoria causing serious smoke problems in NSW and Victoria.

In early 20XX, fires were out of control in Victoria. Real estate sales slowed as travel was discouraged and the desire to live in the bush waned. Victorian Premier, Daniel Andrews declared a State of Disaster following the spread of fires in XXX and XXX in the state's northeast. The fires in southern NSW and northeast Victoria combined with smoke impacting on businesses and travel across Victoria.

The Co-executors decided not to put the property on the market after their real estate agent advised to wait until the fire situation had settled.

A couple months later, after the fires were contained, the Co-executors signed a sale agreement with the real estate agent. Shortly after, the Victorian Government declared a State of Emergency due to the COVID-19 pandemic. Travel was limited.

In March 20XX, National Stage 1 and 2 restrictions were introduced affecting real estate business trading restricting individual movements except for essential travel.

In April and May 20XX, Stage 3 Victorian state-wide lock down was introduced. Real estate inspections were not included as one of the four reasons to leave home.

In June and July 20XX, Victorian COVID-19 restrictions switched between increasing and decreasing but gave no certainty to real estate inspections in either regional or metropolitan areas.

In August 20XX and October 20XX, the Victorian Government declared a State of Emergency and introduced Stage 4 restrictions and curfew for Melbourne - no movement allowed except for essential services and state borders closed.

In late September 20XX, real estate inspections were allowed for Melbourne residents. Melbourne residents were still not permitted to travel to regional Victoria to inspect properties.

The property continued to be actively marketed as a holiday home during the COVID-19 pandemic. However, travel and inspection restrictions made it difficult to attract buyers.

In early November 20XX, Melbourne restrictions eased to be in line with regional Victoria and travel was allowed. Shortly after, the property sold and settled within five 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

Income Tax Assessment Act 1997 section 118-200