Edited version of private advice

Authorisation Number: 1052036389438

Date of advice: 16 November 2022

Ruling

Subject: Commissioner's discretion - deceased estate

Question

Will the Commissioner exercise his discretion under Section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the two-year period to dispose of the dwelling?

Answer

Yes. Having considered your circumstances and the relevant factors the Commissioner will allow an extension of time. However, the extension only extends to the dwelling and the land adjacent to the dwelling to the extent that the land was used primarily for private or domestic purposes in association with the dwelling, up to a maximum area of 2 hectares. Further information can be found by searching 'QC 66057' on our website, ato.gov.au.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July XXXX

Relevant facts and circumstances

PERSON A died on XXXX.

PERSON A was an Australian resident at the date of death and not an excluded foreign resident.

The primary asset of the estate of PERSON A was a property located at XXXX (the property).

The property was solely owned by the deceased.

The property was acquired by the deceased in XXXX for approximately $XXXX plus associated acquisition costs.

The property consisted of approximately XXXX hectares and sits within a nature conservation area.

The property was resided in by PERSON A and De facto partner (PERSON B).

The XXXX hectare main residence area, that is subject to the private ruling application includes a XXXX bedroom dwelling. The dwelling was not used to derive assessable income at any time.

Due to the remoteness of the property a caretaker would reside in the main residence dwelling whilst attending to the maintenance of the property. No income was received.

The Will of PERSON A provided that:

•         proceeds from the sale of the property were to be distributed to PERSON A's former spouse

•         PERSON B receiving certain furniture assets, $XXXX in cash and the right to live in the property until sold and on sale of the property to be provided with a property to the value of $XXXX for remainder of life

•         PERSONS A's sister receiving $XXXX in cash

The executors of the Estate are PERSON A's former spouse and an independent accountant (Executors).

Following PERSON A's death in XXXX, the Executors of the Estate sought to realise relevant assets including the property.

The commencement of the administration of the Estate led to a legal dispute between PERSON B and the Executors. The legal dispute and subsequent court case were in respect of the Will and extended across superannuation and other benefits. The matter was settled in court in XXXX with PERSON B receiving additional funds than originally outlined in the Will.

Despite the legal matter being settled in XXXX the Executors were unable to gain access to the property. Repairs and maintenance were undertaken in XXXX to make the property saleable.

The property was listed for sale on XXXX.

In XXXX, the GOVERNMENT AUTHORITY approached the Executors with a proposal to build a tower on the property with the associated impact of a potential partial compulsory acquisition.

In XXXX, almost XXXX years after initial contact from the GOVERNMENT AUTHORITY and following submissions commissioned by the Estate as to the impact of building the tower on or close to the property, the GOVERNMENT AUTHORITY declared it no longer had any interest in erecting the tower on the property.

Following the resolution of the GOVERNMENT AUTHORITY matter, the Executors appointed a new real estate agent on XXXX.

The property was sold for $XXXX in XXXX. Settlement occurred in XXXX. This was the first offer received for the property.

A copy of the contract of sale was provided.

The property was vacant between PERSON A passing and ultimately being sold.

Reasons provided for deterrent to potential purchasers:

•         The potential for a partial compulsory acquisition of the property together with a tower being potentially built on the property deterred potential purchasers such that despite efforts by the original real estate agent the property remained unsold. The original real estate agent held the property listing for over XXXX years.

•         During this time, other environmental issues such as the bushfires in late XXXX and the commencement of the COVID pandemic in XXXX

Relevant legislative provisions

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 118-120

Income Tax Assessment Act 1997 section 118-195