Edited version of private advice

Authorisation Number: 1052086154858

Date of advice: 14 February 2023

Ruling

Subject: CGT - 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 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:

Income Year ending XX/XX/20XX

The scheme commenced on:

XX/XX/20XX

Relevant facts and circumstances

The Deceased passed away intestate on XX/XX/20XX.

As at the date of death, the Deceased owned a property (the Property) which was their main residence and was not used to produce assessable income.

Shortly after the Deceased's passing, XXX instructed their legal representative at the time to apply for letters of administration from the Supreme Court. This was the catalyst for protracted litigation which culminated in letters of administration being granted on XX/XX/20XX to the Administrators.

Upon letters of administration being granted, the decision was taken by the Administrators - on advice from their legal representative - to repay the loan secured to the Property by registered mortgage so that the Property could be disposed unencumbered. This decision was taken for several reasons including but not limited to:

1.         The mortgage over the Property was complicated by the fact that it was security for a loan to a third party that the Deceased had personally guaranteed;

2.         In order to be in a position to dispose of the Property, the Administrators were required to have their names listed on the title of the Property which would require the Mortgagee releasing the title to XXX if the loan remained outstanding; and

3.         In the legal representative's professional experience dealing with the Mortgagee, the above two factors meant that the most efficient and appropriate action was to arrange for discharge of the mortgage prior to the disposal of the Property.

On XX/XX/20XX, the Administrators submitted a death benefit claim to the Deceased' Superannuation Fund.

On XX/XX/20XX, the dealt benefit claim was paid out to the Administrators.

On XX/XX/20XX, the Administrators repaid the loan in full.

On XX/XX/20XX, the legal representative requested the Mortgagee discharge the mortgage and release the certificate of title which - due to errors of the Mortgagee - did not occur until XX/XX/20XX.

On XX/XX/20XX, the Administrators entered a contract for sale of the property which settled on XX/XX/20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 102-20

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 118-195