Edited version of private advice

Authorisation Number: 1052102551428

Date of advice: 28 March 2023

Ruling

Subject: Deceased estate two-year discretion

Question

Will the Commissioner exercise the discretion under section 118-195 to allow an extension of time for you to dispose of your ownership interest in Property One and disregard the capital gain or capital loss you made on the disposal?

Answer

Yes.

Question

Will the Commissioner exercise the discretion under section 118-195 to allow an extension of time for you to dispose of your ownership interest in Property Two and disregard the capital gain or capital loss you made on the disposal?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased owned a property that was acquired after 1985 (Property One) and a property that was acquired prior to 1985 (Property Two).

Property Two was purchased jointly by the deceased and their sibling.

Up until 20XX, the deceased spent X months of the year at Property One and X months of the year at Property Two.

The deceased's sibling passed away in January 20XX.

Following the deceased's sibling's death, their X% ownership of Property Two was transferred to the deceased.

The deceased passed away in November 20XX.

Property One was the main residence of the deceased just before they passed away and was not used to produce assessable income at the time of death.

Property Two was not the main residence of the deceased and was not used to produce assessable income at the time of death.

Property Two was used by the deceased when they travelled interstate and remained vacant at all other times.

Property One was situated on less than two hectares of land.

Property Two was also situated on less than two hectares of land.

Shortly after the deceased passed away, the deceased's family member engaged with a legal firm to request a copy of the deceased's will.

In December 20XX, the relevant public trustee was advised of the deceased's passing as the legal firm that the deceased's family member had engaged with had contacted them to request a copy of the deceased's will.

The public trustee located a will for the deceased which was issued in December 19XX.

The deceased's family member believed that the deceased had made a more recent will.

The legal firm that the deceased's family member had engaged with investigated if a more recent will had been prepared by the deceased.

The public trustee also investigated if the deceased had prepared a more recent will.

In September 20XX, the investigations concluded when the public trustee were satisfied that after both their searches and the legal firms searches confirmed that no later will existed for the deceased.

The public trustee commenced the administration process of the estate which involved verifying the assets that the deceased held at the time of their death.

The public trustee completed a notice of intent to administer the estate to the relevant Supreme Court, which provides several working days for anyone to come forward with a later will before a probate application can be submitted.

In December 20XX, a notice of intent was advertised.

In January 20XX, the public trustee lodged the probate application to the relevant Supreme Court as they had not been advised that a more recent will for the deceased was held.

Probate was granted in February 20XX.

In June 20XX, the legal firm that the deceased's family member had engaged with sought to resolve the family member's claims with mediation and proposed this occur in July 20XX.

In July 20XX, the residual beneficiaries of the deceased's will rejected this proposal on the basis that the deceased's family member had an unsubstantiated claim against the estate. The residual beneficiaries then made a counteroffer to the family member to save the estate from any further legal costs. The deceased's family member did not accept this offer.

In October 20XX, an additional offer was made to the deceased's family member by the residual beneficiaries which was accepted.

In December 20XX, an agreed settlement sum was paid to the deceased's family member.

In December 20XX, the public trustee commenced the sale process for both Property One and Property Two.

The sale process was delayed for a several weeks as real estate offices were closed during a specific period.

In January 20XX, Property Two was cleaned prior to being listed for sale.

On 27 January 20XX, a real estate agent was engaged to sell Property Two and an auction was scheduled to occur in March 20XX.

In March 20XX, the auction to sell Property Two proceeded, however there were no interested bidders in attendance and the property remained on the market.

As Property One was interstate, extra attention was required by the public trustee to locate suitable and qualified real estate agents.

Prior to engaging a real estate agent to sell Property One, the public trustee arranged for the property to be cleaned.

In April 20XX, the public trustee decided upon a real estate agent to sell Property One.

A contract to sell Property One was entered into in May 20XX with settlement occurring in June 20XX.

A contract to sell Property Two was entered into in June 20XX with settlement occurring in July 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195