Edited version of private advice

Authorisation Number: 1052050437700

Date of advice: 27 October 2022

Ruling

Subject: CGT - deceased estate

Question

Will the Commissioner exercise their discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) to extend 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. Further information about this discretion can be found by searching 'QC 66057' on ato.gov.au.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Your parent was the registered owner of the property which they had owned since before 19XX.

The property was their main residence however they were in care prior to their passing.

The property was never used to produce income.

You, your sibling 'Person A', and your sibling 'Person B', were all appointed as your parent's enduring power of attorney.

On XX October 20XX your parent died.

They did not have a spouse at the time of their death.

The deceased had a will, but you did not get probate granted as the only asset of value was the property.

Under the deceased's will you and Person B were appointed as the executors and trustee of the deceased's estate.

Approximately 4 months prior to their death you and Person A signed a contract to sell the property to Person B.

This was a contract of sale with settlement initially set as 64 days after the contract date.

The sale price was the appraised value of the property at the time the contract was signed.

You were authorised to sell the property during their lifetime.

Person B was overseas in the month prior to and at the date of death.

The property did not settle as initially arranged.

Approximately 4 months after the date of death the property was appraised, and the value had increased. Person B paid transfer duty on this new amount.

After the new valuation was obtained, transfer duty was paid to their lawyer's trust account.

Approximately 1 week after the new appraisal, a 'settlement' event took place with the proceeds from the sale distributed in accordance with the deceased's will. At this time, Person B took possession of the property under the contract and treated it as their own including paying the rates and utilities for the property. This was not formal settlement and no change in title occurred.

Person B uses the property as a holiday home for them and their family.

Approximately 5 months after the date of death, the transfer of the property was then lodged for registration.

Formal settlement on the property was extended by agreement for approximately 6 months after the initial settlement date.

Approximately 5 months after the date of death the Titles Office issued a requisition the effect of which was that the contract could no longer proceed to completion.

There was no communication from the Titles Office prior to the requisition being issued.

The Titles Office claimed there was a conflict in selling the property to Person B while they were one of the three deceased's children who held enduring power of attorney, even though Person B did not act in their capacity under the enduring power of attorney in the sale - the contract was signed by you and Person A only. The transfer would not be registered.

You took the view that the Titles Office would not change its view, so Person B requested for the transaction to be withdrawn.

Approximately 7 months after the date of death the contract was terminated.

While this contract was terminated, the distributed funds were retained by the beneficiaries - the funds were not refunded to Person B.

Approximately 9 months after the date of death you were registered as personal representative of the estate after Person B renounced their rights as the joint trustee under the deceased's will to ensure there was no further perceived conflict of interest in selling the property.

Approximately 10 months after the date of death the fees paid to the Titles Office were refunded.

Approximately 1 year and 5 months after the deceased death the application to the Office of State Revenue (OSR) for the refund of the transfer duty was lodged.

To consider the request for a refund, the application needed to include the relevant evidence required by OSR.

The application was not lodged earlier due to delays in your lawyers taking the necessary action and pursing the information necessary to satisfy the requirements of the OSR in relation to the refund.

10 days after the application for the refund of transfer duty was lodged the OSR requested further information.

The requirements of the OSR included various statutory declarations from you and Person A as the enduring power of attorneys who had signed the first contract.

It took some time to be answered. It was answered approximately 9.5 months after the information was requested.

Approximately two weeks after this a further requisition was issued from OSR which was answered 9 days later.

The next day the refund of transfer duty was issued by the Titles Office. This was approximately 2 years and 4 months after the deceased death.

The refund needed to be obtained before a new contract was signed as Person B did not want to incur the additional transfer duty before they were sure the refund would be paid.

Approximately 2 years and 5 months after the deceased death a new contract was entered into, by you, as the personal representative, and with Person B, as the buyer, to sell the property for the same sales price as in the first contract dated XX June 20XX.

Transfer duty was assessed and paid on this contract based on an updated market appraisal.

Approximately 2 years and 7 months after the deceased death, the property was registered in Person B's name.

At the time the property was sold, you owned the property as trustee of the deceased's estate

This transaction was a family transaction ad was agreed to by all of the children of the deceased and grandchildren of the deceased who received the proceeds of the sale in accordance with the deceased's will.

You never lived in the property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118.195