Edited version of private advice

Authorisation Number: 1051973570183

Date of advice: 14 April 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 property 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 period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 2021

Relevant facts and circumstances

At some time before 1985, the deceased and their spouse jointly purchased the house.

The property size is less than two hectares.

The deceased had three children. Child 2 moved into the house.

The deceased was diagnosed with dementia.

At some time after 1985, the deceased's spouse passed away. The house was the deceased's and his spouse's main residence until she passed away. The deceased continued to live at the house.

Child 2's family moved into the house.

Shortly after, the deceased moved into a nursing home. Child 1 (Executor) chose on behalf of the deceased to continue to treat the house as the deceased's main residence while in the nursing home. Child 2 and their family continued to live in the house.

Shortly after, Child 3 applied for an order to the Tribunal, which made findings and orders as follows:

•         the deceased had a mental incapacity

•         there is a conflict between Child 3 and Child 2 regarding the management of the finances and estate of the deceased.

•         for practical reasons, Child 2 has been handling the day to day finances and the management of the deceased under the Enduring Power of Attorney.

•         Child 2 and their family resided rent free in the house. The deceased resided permanently in an aged care facility. There is an apparent conflict between the financial interests of Child 2 and the financial interests of the deceased.

•         significant monetary withdrawals have been made from bank accounts in the name of the deceased from by Child 2 (bank account withdrawals). The Tribunal made no finding of maladministration, but the matter was ordered to be investigated by the administrator.

•         in all the circumstances, it was appropriate for an independent administrator, the Public Trustee, to be appointed.

Some time later, the deceased passed away. The appointment of the Public Trustee as the administrator ceased on the death of the deceased. However, the investigation of the bank account withdrawals had not been completed.

Shortly after, probate was granted to the Executor and leave was reserved to the other children. Child 3 requested the Executor continue to investigate the bank account withdrawals. While the Executor was investigating Child 3's claims, it was not to Child 3's satisfaction.

Child 3 engaged a lawyer to articulate their claims further and requested authority from the Executor to obtain bank statements of the deceased.

As the investigation involved many old bank records, it took at least 8 months to obtain those records and analyse the deposits and withdrawals.

Some time later, the parties commenced settlement negotiations. Many counter-offers were made. A settlement agreement was reached in principle. As part of the settlement agreement, Child 2 will incur rent for a period after the deceased's death. The total rent amount to be deducted from their settlement amount.

The Executor organised valuers to value the house and considered various real estate agents. This was to avoid any further disputes among the beneficiaries.

An auction was held but the house didn't sell as there were no registrations. Shortly after, the house sold and settled within 10 months of the two-year period.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-145

Income Tax Assessment Act 1997 section 118-195