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Edited version of private advice
Authorisation Number: 1052112343325
Date of advice: 23 May 2023
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 and disregard the capital gain or capital loss you made on the disposal?
Answer
Yes.
Although using the dwelling to produce income after the deceased's death is usually a factor unfavourable to the granting of an extension, in this case it is noted that this was done to pay for the estate's expenses during the period the estate was prevented from selling the property. Having considered all of your circumstances in their entirety and the relevant factors the Commissioner will allow an extension of time. Further information about the Commissioner's discretion can be found by searching 'QC 66057' on ato.gov.au.
This ruling applies for the following period:
Year ended 30 June 20XX.
The scheme commenced on:
1 July 20XX.
Relevant facts and circumstances
The Deceased and their spouse jointly purchased a property after 20 September 1985 (the Dwelling) which they used as their principal place of residence.
Later, in order to support individuals X and Y, the Deceased and their spouse allowed the Dwelling to be used as security for a loan taken out by X and Y from a Finance Company (the Finance Company was given a mortgage over the Dwelling).
The Deceased's spouse pre-deceased the Deceased.
The Deceased passed away on XX/XX/20XX.
The Dwelling was the Deceased's main residence at their time of death and was not used to produce income at that time.
The Dwelling was situated on less than two hectares of land.
Shortly after being granted probate, the executor and their lawyer contacted the Finance Company to request they release their mortgage over the Dwelling, but they refused.
The executor also attempted to have X and Y take action to resolve the matter but there were difficulties as they were now estranged.
The executor's lawyer tried again to deal directly with the Finance Company but were unsuccessful.
Subsequently X resolved the matter with the Finance Company.
Once the mortgage had been discharged and title to the Dwelling had been transferred to the estate, it was placed on the market for sale. It was sold and settlement took place shortly afterwards.
After the Deceased's death, the property was rented out to cover the rates, insurance, maintenance and legal costs incurred by the estate.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-195