Edited version of private advice

Authorisation Number: 1051966006850

Date of advice: 31 March 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 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 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

The scheme commences on:

7 October 20XX

Relevant facts and circumstances

The Deceased owned a Dwelling that passed to them on the death of their spouse in 20XX.

The Deceased had three children, his biological child (Child A), and two stepchildren (You and Child C).

The Deceased lived in the Dwelling as their main residence.

The Deceased had suffered a series of strokes and was confined to a wheelchair.

The Deceased and Child C had a complete relationship breakdown in 20XX which left Child A as the sole carer. Child A had also just lost their mother-in-law, and was undergoing medical treatment, having their first child in 20XX.

In early 20XX the Deceased suffered further strokes leading to a prolonged stay in hospital, then a hospice, and briefly residential care.

The Deceased passed away on XX October 20XX (The Deceased).

The market value of the Dwelling at date of death was between $X to $X.

Child A was the Executor of the Estate.

During that same year, Child A had fostered a child of a friend that had had a mental breakdown. The child was a teen and had attempted suicide. The foster child was diagnosed with anxiety, depression and Post Traumatic Stress Disorder. The foster child's parent became abusive and the dealings with DHHS and lawyers was extremely stressful for Child A.

Soon after, Child A and their spouse had their second child. Child A was caring for a newborn, a toddler and a teenaged foster child with a mental illness.

Child A was suffering from an illness. Child A had suffered from illness A and illness B for years.

After the Deceased's death, Child A noticed that Child C had been removed from the will and that the Dwelling that was to be shared between Child A, You and Child C, was now to be shared two thirds to Child A and one third to You. Child A did not tell You about the change in the will because Child A was so upset by the change.

In late 20XX You and Child C approached Child A to get the finalisation of the estate moving, and Child A began communications with her Solicitor.

Child A was not aware of the two year period to dispose of an inherited dwelling.

You, Child A and Child C reached an agreement that the Deceased's estate was to be distributed in equal one third shares to all of you.

Child A would retain ownership of the Dwelling, obtaining finance to do so, and You and Child C would receive a cash payment for your share. A Deed was to be written outlining this agreement.

On XX February 20XX all documents were provided to the Solicitor as requested.

On XX April 20XX the title for the Dwelling was transferred to Child A in their role as Executor of the Estate.

On XX June 20XX Child A approached the ATO to request an extension of time to dispose of the inherited dwelling. She was advised that it is preferable to have sold the Dwelling and to be able to provide a settlement date to allow the extension to be considered.

On XX August 20XX the Dwelling was transferred into the names of Child A (two thirds) and yourself (one third) in accordance with the will.

On XX October 20XX Child A followed up to see if any progress had been made with the Deed.

On XX October 20XX you received a draft Deed.

On XX October 20XX Child A followed up for the revised draft but did not get a response. Attempts to contact the Solicitor were made on XX October 20XX.

Child A now needed to have a new market valuation completed and to provide financial information all over again because the Deed was not prepared in time.

Further attempts to make contact with the Solicitor were made on XX November 20XX. Several other attempts were made to contact via phone but the phone calls were not returned.

On XX November 20XX The Solicitor advised that the Deed writer had been busy with clients in City A but could now return to the office with lessened restrictions.

The process was slowed considerably due to COVID restrictions in the office.

Child A made numerous attempts to speed up the process. Child A attempted contact with the Solicitors on five more occasions over the next two months.

On XX January 20XX Child A received a reply from the solicitor suggesting they have an appointment in the solicitor's office. An appointment was booked for XX February 20XX.

On XX February 20XX the final Deed was received from the solicitor. It was returned to them within a week.

On XX March 20XX another market valuation was required to be provided to the solicitor given the amount of time that had passed.

A market value for the Dwelling of $X was obtained.

In total, Child A's broker had to get three valuations completed and complete the loan application process twice due to the time it was taking to have the Deed completed.

On XX March 20XX the Solicitor requested further information which you supplied the same day.

Child A and their spouse obtained their finance so that they could pay You and Child C one third each, or $X.

Settlement occurred on XX May 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 118-195