Edited version of private advice

Authorisation Number: 1052067957320

Date of advice: 8 December 2022

Ruling

Subject: Commissioner's discretion - deceased estate

Question

Will the Commissioner exercise the discretion under section 118-195 of the Income Tax Assessment Act 1997 to allow an extension of time for you to dispose of your ownership interest in the dwelling acquired from a deceased estate and disregard the capital gain or capital 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 ato.gov.au for 'QC 66057'.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The deceased purchased an X% ownership interest in the relevant property over twenty years prior to its eventual sale.

The deceased's child and the deceased's child's spouse jointly purchased the remaining Y% ownership interest.

The land size of the property is less than two hectares.

The deceased lived in the property and treated it as their main residence from its purchase in until their death roughly nine years after the property's purchase.

The deceased's child also lived in the property and treated it as their main residence from its purchase for a period of around ten years when the marriage to their spouse broke down.

The deceased's child's spouse lived in the property and treated it as their main residence from its purchase for a period of around twenty-five years, which is roughly six years after the deceased's date of death and one year prior to the sale of the property. The deceased's child's spouse vacated the property for medical reasons.

The deceased left a Will providing that X% of their estate was to be distributed to their child, and the remaining X% was to be held in trust for their grandchildren.

Probate was granted to the executors less than one year after the deceased's date of death.

Divorce proceedings ensued between the deceased's child and the deceased's child's spouse less than two years after the deceased's date of death.

The deceased's child's spouse contested the Will of the deceased and fought for the right to occupy the property as well as the right to a larger share of the proceeds of the sale of the property than the initial stake in the property which the deceased's child's spouse had purchased.

Court orders were given as part of the divorce settlement between the deceased's child and the deceased's child's spouse which provided the deceased's child's spouse with the legal right to occupy the property until a point in time roughly seven years after the date of the court order.

The divorce settlement also ordered that the deceased's child and the deceased's child's spouse each receive X% of the net proceeds from the sale of the deceased's interest in the property, with the remaining X0% to be held on trust for the grandchildren.

The contract for the sale of the property was executed almost eight years after the deceased's date of death.

Settlement of the property occurred eight weeks after execution of the contract of sale.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195