Edited version of private advice

Authorisation Number: 1052023868402

Date of advice: 30 August 2022

Ruling

Subject: CGT - deceased estates

Question

Will the Commissioner exercise the discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the two year period until the date settlement for the Executor to dispose of their ownership interest in the property?

Answer

Yes. Having considered your circumstances and the relevant factors set out in the Practical Compliance Guideline PCG 2019/5, the Commissioner will exercise the discretion to extend the two year period until the date of settlement for the Executor to dispose of their ownership interest in the property. The main residence exemption under subsection 118-195(1) that applies to the property is limited to two hectares of adjacent land including the land on which the dwelling is situated.

Further information about this discretion can be found by searching 'QC 66057' on ato.gov.au

For information on how to calculate the capital gain or capital loss you make on the remainder of your land which is the excess of two hectares, refer to Taxation Determination TD 1999/67.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The Deceased and their spouse owned a property in State A. The property is their family home and it's their main residence for over XX years.

They acquired the property prior to September 1985.

The property exceeded two hectares in size.

The Deceased's spouse passed away earlier. Upon the death of the spouse, their ownership interest in the property passed to the Deceased, who continued to live in the family home as their main residence.

The Deceased passed away a short time after.

One of the Deceased's children is sole executor of the Estate of the Deceased (the Executor). The Executor lives in State B.

In February 20XX probate was granted to the Executor by the Supreme Court of State A.

In March 20XX the COVID pandemic led to the numerous closures of interstate borders between State A and State B, often without warning, and with significant quarantine requirements for travellers.

This prevented the Executor, who is based in State B, from travelling to State A to prepare the property ready for sale.

Each visit to the property in State A would have meant the Executor had to go into a 14 day quarantine at their expense, or the possibility for the Executor unable to return home to State B at all, remaining stuck interstate.

In February 20XX, the Executor's nephew died suddenly. This caused a significant emotional toll for the Executor and their sibling who is the parent of the Executor's nephew. It prolonged the process of preparing the property for sale.

The last border closure between State A and State B lasted more than 5 months.

As soon as the border was opened the Executor proceeded to actively try and sell the property.

In January 20XX the Executor engaged a local real estate agent and a conveyancing firm who immediately began the required property searches and placed the property on the market.

The property was listed at a certain price on the advice of the real estate agent.

During the following months, the Executor made follow up action with the real estate agent on a regular basis to ascertain what the interest in the property was; and whether the listed price of the property was competitive at market.

The Executor requested listing of the property to more than one real estate agency.

To ensure the property sold quickly, the Executor decided to drop the asking price.

The property sold at the final agreed price that is significantly less than the original listing price.

The property has not been used to produce assessable income.

There have not been any renovations made to the property since the Deceased's death.

Settlement is due to occur two years and 11 months after the Deceased's date of death.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195