Edited version of private advice

Authorisation Number: 1052040279549

Date of advice: 30 September 2022

Ruling

Subject: CGT - deceased estate

Question 1

Will section 118-210 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the sale of the Property?

Answer

No. Based on the facts provided, section 118-210 will not apply.

Question 2

Will the Commissioner allow a longer period for you to sell the Property so that the main residence exemption in section 118-195 of the ITAA 1997 will apply to disregard the capital gain on the sale of the Property?

Answer

Yes. Having considered the circumstances and the relevant factors set out in the Practical Compliance Guideline PCG 2019/5, the Commissioner will exercise the discretion to allow a longer period for you to sell the Property and disregard the capital gain on the sale.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 19XX

Relevant facts and circumstances

The Property was acquired by the Deceased prior to 20 September 1985 by transmission from the estate of the spouse.

The Property is a dwelling.

The Deceased was an Australian resident for tax purposes and was not an excluded foreign resident.

The Deceased's child resided with the Deceased at the Property. The child had a severe disability and was cared for by the Deceased until the child moved to a nursing care facility in 19XX.

The Deceased resided at the Property until the date of death.

The Court granted Probate to one the Executors appointed under the Will of the Deceased. The other Executor renounced probate.

The Will provides that the Executor/s shall hold the Property until after the death of the Deceased's child who had severe disability; and until that time the Executor shall be entitled to use and occupation of the Property subject to the Executor paying the rates, taxes, insurance, and maintenance expenses in respect of the Property.

Under the terms of the Will, the Property could only be sold after the death of the Deceased's child.

Despite that the Executor had the right to occupy the Property, the Executor did not actually live in the Property.

In December 19XX, the Executor entered into an agreement with the child of the Deceased. The agreement allowed the Deceased's child to occupy the property. However, the Deceased's child did not actually live in the Property. The Deceased's child paid for all the maintenance expenses until they died.

The terms of the Will provide that the Executor/s, upon the death of the disabled child, shall sell the Property and 50% of the proceeds will be given to the child; and two charitable entities will get 25% each of the proceeds.

The Deceased's disabled child, died on XX June 20XX.

The Deceased's child, died on XX October 20XX.

Following the death of the child, an unsigned will of the Deceased was considered due to a change in the proportion of proceeds from the sale of the Property. The parties resolved the issue, and no claims were brought in respect of the unsigned will.

An agency agreement for the sale of the Property was entered into in February 20XX.

No major repairs or refurbishments were done on the Property.

The Property was left vacant for the period from the child moving into a nursing care facility until the Property was sold.

The Property was not used for income producing purposes during the period it was owned by the Deceased or the Estate of the Deceased.

The Property was sold at auction in April 20XX with Settlement occurring in May 20XX.

Summary of events contributing to the delay in the sale of the Property:

1.    The Executor(s) were required to hold the property until after the death of the disabled child.

2.    Sudden death of the other child shortly after the death of the sibling.

3.    Consideration of the unsigned will by the relevant parties.

Assumption

It is assumed the Property is less than 2 hectares of land area.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195

Income Tax Assessment Act 1997 section 118-210