Edited version of private advice

Authorisation Number: 1052144623843

Date of advice: 2 August 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 (ITAA 1997) to allow an extension of time for you to dispose of your ownership interest in the property 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 commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased passed away in XX/20XX.

As at the date of death, the deceased owned the property.

The deceased acquired the property after 20 September 1985, following the death of their spouse.

The property was the main residence of the deceased up until 20XX, when they relocated. The deceased continued to treat the property as their main residence up until their death.

The property was not used to produce assessable income at the time of the deceased's death nor at any time during the ownership period.

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

The deceased's will named Person One and Person Two as executors (the executors) of the estate (the estate).

The will provided a right to occupy to Person Three. The will also provided a right to occupy to Person One or Person Two so that they may care for Person Three.

Following the death of the deceased, Person Two moved into the property to care for the Person Three. At this stage, probate of the will was deemed unnecessary because the property was being occupied by Person Three in accordance with the terms of the will.

In XX/20XX, Person Three experienced health issues and was hospitalised.

Between XX and XX/20XX, Person Three went into respite care at a care facility (the care facility) several times.

In XX/20XX, Person Three's health deteriorated, and Person Two sought a further period of respite care. Attempts for admission to a public hospital were unsuccessful. The care facility offered a permanent position for Person Three to ensure their short-term safety. This offer was accepted by Person Two because the care facility was the most appropriate accommodation available to support Person Three's medical condition.

Despite the placement being permanent, it was the intention of the parties that Person Three would return to the property permanently once their condition improved. Whilst at the care facility, Person Three continued to spend weekends with Person 2 at the property.

In XX/20XX, title to the property was registered to the executors.

In XX/20XX, the care facility made a formal application for financial management of Person Three.

From XX/20XX, an external agency was appointed to be the administrator for financial matters for Person Three for a period. During this time, Person Three could not return to the property.

In XX/20XX, Person One was admitted to a care facility.

In XX/20XX, the external agency was discharged, and Person Two was re-appointed Person Three's administrator.

In XX/20XX, a meeting was held between the estate's solicitor, Person Two and the enduring attorney's for Person One. As Person One was registered on the title for the property, and Person Two had lost capacity to enter legal contracts, the property could not be disposed. It was determined that Person Two would need to make an application for probate in an individual capacity.

In XX/20XX, Probate was granted to Person Two.

In XX/20XX, the necessary application for the title to be registered to Person Two as personal representative of the estate was prepared by the estate's solicitor and lodged for registration.

In XX/20XX, legal title was registered to Person Two as personal representative. Around this time, due to the COVID-19 pandemic commenced, it was determined that it was in the best interests of Person Three to remain in the care facility due to their health issues.

In XX/20XX, a real estate agreement was entered into with Company One to dispose of the property off market. It was determined that this was the most economical approach as preparing the property for auction would require the estate to undertake substantial repairs and cleaning. The term of this agreement expired in XX/20XX. Although several buyers were interested, the agreement ended without a sale eventuating.

In XX/20XX, an additional real estate agreement was entered into with Company One. This term expired in XX/20XX. Throughout the appointment, the selling agent experienced health issues and a potential buyer fell through.

In XX/20XX, a real estate agreement was entered into with Company Two. This term expired in XX/20XX. Upon no sale eventuating, a further real estate agreement was entered into in XX/20XX to list the property for forthcoming auction. The real estate agent proposed a $XXXX advertising campaign, repairs to the property and a clean-up of the property. In XX/20XX, a real estate agreement was entered to list the property for auction in XX/20XX.

A contract was entered into to sell the property in XX/20XX, with settlement occurring in XX/20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195