Edited version of private advice

Authorisation Number: 1052086307019

Date of advice: 15 February 2023

Ruling

Subject: Deceased estates - 2 year discretion

Question 1

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 for the disposal of the property by the Executors of the deceased estate and disregard any capital gain or loss they make on disposal?

Answer

Yes

This ruling applies for the following period:

Year ending DD MM YYYY

The scheme commenced on:

DD MM YYYY

Relevant facts and circumstances

The deceased passed away on DD MM YYYY.

The dwelling is located at a Place (the property).

The deceased acquired the property after 20 September 1985.

The property was the main residence of the deceased just before they passed away and was not used to produce assessable income at that time.

The property was situated on less than two hectares of land.

The deceased left a Will dated DD MM YYYY whereby Friend 1 and Friend 2 were appointed Executors of the Estate. Friend 2 was the sole beneficiary of the Estate.

The deceased's sister contacted a law firm to review the Deeds Register on DD MM YYYY.

The lawyers were in contact with Friend 1 by telephone and email in the months of MM, MM, MM, MM, MM and MM YYYY.

The law firm conducted long searches, including the electoral roll, to locate the sole beneficiary, unsuccessfully.

Friend 1 went to considerable effort and expense but due to the complexity of the Estate, was unable to resolve the issues presented.

Another representative organisation (The representatives) were contacted by the law firm in MM YYYY to apply for grant of Letters of Administration on the basis that Friend 1 had renounced their Executorship and Friend 2 could not be found. The representatives contacted Friend 1 to verify their renunciation and found that they did not understand the role, found it too complex and time consuming. The representatives sought Friend 1's approval and authority as a nominated Executor to proceed with obtaining the Probate and received this on DD MM YYYY.

Covid lockdowns and travel restrictions delayed the representative's ability to conduct a property inspection and compile an inventory of contents for inclusion in the Probate application.

Due to covid, there were unexpected working from home issues which caused delays in obtaining the death certificate and verifying affidavit from the witness to the authority. The death certificate had named the deceased incorrectly and had to be corrected and the affidavit was also completed incorrectly the first time. The representatives also needed to apply for a divorce certificate from the Family Court of Australia. This certificate was obtained on DD MM YYYY. These documents were required for making an application for Probate.

Probate was granted on DD MM YYYY.

The representatives were unable to locate Friend 2, the sole beneficiary under the Will to obtain instructions and had to engage XX in MM YYYY. The representatives received confirmation on DD MM YYYY that XX were able to locate Friend 2. XX contacted them immediately by phone and sent documents so they could formally identify themselves. These were received back from Friend 2 on DD MM YYYY.

The beneficiary gave consent to sell the property and the representatives immediately commenced the sale process of the property by arranging for it to be cleaned and valued. The representatives engaged Real Estate Agents who arranged an auction on DD MM YYYY. The property could not be sold and was passed in due to an absence of bidders.

The representatives again engaged with real estate agents and obtained a revised valuation report. An unconditional offer was received on DD MM YYYY with settlement occurring on DD MM YYYY.

Relevant legislative provisions

Income Tax Assessment Act 1997 - subsection 118-195