Edited version of private advice

Authorisation Number: 1051954756727

Date of advice: 28 February 2022

Ruling

Subject: Commissioner's discretion - deceased estate

Question

Will the Commissioner allow an extension of time for you to dispose of your ownership interest in the dwelling (the property) and disregard the capital gain or 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:

The year ended 30 June YYYY

The scheme commences on:

DD/MM/YYYY

Relevant facts and circumstances

The deceased passed away on DD/MM/YYYY.

The deceased acquired the property before 20 September 1985.

The deceased passed away leaving a will (the Will).

The deceased's de facto partner contested the Will and a dispute arose between the deceased's de facto partner and the deceased's two children: Child 1 and Child 2.

The dispute was resolved by a Deed of Settlement (Deed 1), which provided that the property be transferred to the deceased's de facto partner and Child 1 in their capacity as trustees.

Deed 1 also granted the deceased's de facto partner an exclusive right to reside in the property, which would cease upon 6 months of them vacating or remaining absent from the property. Upon the end of the deceased's de facto partner's right to reside in the property, Deed 1 provided that the deceased's de facto partner must effect transfer of title in the property to the beneficiaries if they were physically and mentally capable of doing so.

On DD/MM/YYYY, Child 1 passed away. They were survived by their spouse and X children, one of whom is a current trustee.

The deceased's de facto partner appointed an Enduring Power of Attorney (EPOA) on DD/MM/YYYY.

On DD/MM/YYYY Child 2 passed away. Child 2 was survived by their X children, one of whom being the other current trustee.

The deceased's de facto partner resided in the property from before the time of the deceased's passing until they moved into an aged care facility. The deceased's de facto partner was mentally incapacitated at this time.

Lawyer for the current trustees (the Trustees) informed the Trustees when the deceased's de facto partner moved from the property into an aged care facility. The Trustees then requested access to the property to prepare it for transfer of ownership per Deed 1.

From the time the deceased's de facto partner left the property and for a period of six months after, the EPOA refused the Trustees access to the property. In doing so, the EPOA asserted the deceased's de facto partner's right to return to the property for six months following their move from the property into the aged care facility.

From the time the deceased's de facto partner left the property and for a period of six months after, the lawyer for the Trustees and the EPOA's lawyer engaged in communications regarding the Trustee's request to access the property. During this period, the EPOA dealt with the property as if the deceased' de facto partner's right to reside in the property would expire at the end of this six month period.

Further delay and complication was caused by the fact that EPOA did not reside in Australia and would not permit the Trustees to access the property unless EPOA was present.

From the date that the deceased's de facto partner moved out of the property, the registered owners of the property were still the deceased's de facto partner and Child 1. Therefore, transfer of the property could not occur at this point in time because the deceased's de facto partner was mentally incapacitated and Child 1 was deceased.

After the Trustees gained access to the property, they instituted three sets of proceedings in the Court to overcome the legal issues presented by the incapacity of the deceased's de facto partner and death of Child 1 and to enable them to dispose of the property (the Proceedings).

The Proceedings were resolved by Deed of Settlement (Deed 2).

Deed 2 included consent orders to transfer ownership of the property to the Trustees.

X months before settlement, the Court made orders directing that the property and any other property that may have vested in the deceased's de facto partner and Child 1 as trustees should vest in the Trustees.

The Trustees entered into a contract to sell the property on DD/MM/YYYY with a third-party purchaser.

On DD/MM/YYYY title of the property was transferred to the Trustees.

Settlement occurred on DD/MM/YYYY.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195