Edited version of private advice

Authorisation Number: 1052031605666

Date of advice: 9 September 2022

Ruling

Subject: Deceased estate 2-year discretion

Question

Will the Commissioner exercise the discretion to 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 the Commissioner's discretion can be found by searching 'QC 66057' on ato.gov.au.

This ruling applies for the following period:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The deceased owned a property that was acquired after 1985.

The spouse of the deceased passed away in December 20XX.

The deceased passed away in June 20XX.

The property was the main residence of the deceased just before they passed away and was not used to produce assessable income at the time of death.

The property was vacant from the date the deceased passed away until it was sold.

The property was situated on less than two hectares of land.

The deceased's Will stated that the property was to be left to two of the three executors as the third executor had received earlier financial assistance.

A family discussion was held between the three executors to arrange the sale of the property with the third executor to receive some of the profits upon sale.

The third executor did not agree with the proposed sale and sort the assistance of legal representatives as they wanted to claim a third of the amount from the sale of the property and a third of its contents.

The third executors' legal representatives contacted the Estate's legal representatives in August 20XX advising that nothing was to be sold or removed from the property.

Probate was granted in November 20XX.

A Will dispute claim was made by the third executors' lawyers in November 20XX.

This claim was a result of an additional property being mentioned in the Will.

The third executor entered the property and disabled all locks in December 20XX.

A police report was made in December 20XX.

The property could not be sold until the matter went through the Supreme Court.

Mediation was ordered by the courts in June 20XX.

A Will dispute claim was heard in the Supreme Court in May 20XX.

In October 20XX, an engineer's report was obtained stating that urgent maintenance issues were needed to be attended to by the Estate lawyers as the property was severely sinking on both sides.

The Estate paid for both sides of the property to be lifted.

Lifting the property resulted in cracking of most tiled areas of the house and cracks in the plaster.

The Estate would not pay to fix the internal areas of the property as the property was now under litigation.

The executors decided not to fix the maintenance issues until the litigation was finalised.

A court decision was made in December 20XX with the outcome being unfavourable to the third executor.

The decision could not be finalised until the third executors' lawyers confirmed that they would not challenge the outcome.

The Title of the property was transferred into the two other executor's names in March 20XX.

The executors planned to repair the property and list it for sale between May and June 20XX.

Covid-19 lockdowns and travel restrictions from March 20XX meant that it was difficult for tradesman to come to the property and difficult for the executors to travel to the property.

The executors managed to have some of the maintenance completed on the property in between the lockdowns that occurred.

In November and December 20XX, following Covid-19 lockdowns, the executors found that some of the tradesman they had engaged with were either busy or had gone out of business. A plumber came to repair the tiles and the executors performed some of the maintenance on the property themselves.

The executors were told in January 20XX that the spa in the property did not meet legal regulations and they were required to install a fence and repair the windows in order to meet these regulations. The executors also had to obtain a pool safe compliance certificate.

The house was emptied of all belongings from January to March 20XX.

A real estate agent was appointed in February 20XX.

An electrician attended to safety issues including exposed wires and replaced nearly all of the electrical switches in the property in March 20XX.

The property was listed for sale in March 20XX.

A contract was entered into to sell the property in April 20XX with settlement occurring in August 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 118-195(1)