Edited version of private advice

Authorisation Number: 1052151604129

Date of advice: 3 August 2023

Ruling

Subject:CGT - deceased estate

Question

Will the Commissioner exercise the discretion 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 2022

The scheme commenced on:

1 July 2021

Relevant facts and circumstances

The deceased passed away in mid- 2018.

The deceased was an Australian resident for taxation purposes.

As at the date of death, the deceased owned a residential property (the property).

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

The property was initially acquired jointly by the deceased and their spouse before 20 September 1985, and they used it as their main residence.

The deceased's spouse died in in the late 1990's, and the deceased became the sole owner of the property under survivorship.

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 deceased's grandchild was one of the named executors in the will, with leave reserved to the deceased's child.

The deceased's child had frustrated the administration process even before Probate was granted and made it difficult for the deceased's grandchild (the executor) to eventually obtain Probate as sole executor.

In addition, at the time of the deceased's death, the deceased's child was residing in the property and refused to vacate the property.

The following is a timeline of events prior to probate being granted:

Mid-to-late 2018 - The executor was not legally represented. The deceased's child refuses to cooperate with the executor to instruct solicitors holding the Will (Solicitor 1), to proceed with application for Grant of Probate, insisting that the executor step aside as co-executor.

Late 2018 - The executor instructs another solicitor (Solicitor 2) to act on their behalf.

Late 2018 - Solicitor 2 writes to solicitors then acting for the deceased's child (Solicitor 3) but receive no response.

Early 2019 - Further letter issued to Solicitor 3. Email received from them advising that had no instructions to act.

Early 2019 - Solicitor 2 writes directly to the deceased's child advising that in the absence of their co-operation, application will be made to Supreme Court seeking to have them removed as executor.

Early 2019 - Solicitor 2 spoke with the deceased's child, who advised their intention to contest the Will. Solicitor 2 advised them that they could not then act as an executor.

Early 2019 - Solicitor 2 writes to the deceased's child confirming they cannot both act as executor and contest the Will and requested that they sign an authority to enable the original Will to be obtained from Solicitor 1.

Early 2019 - The deceased's child returns the signed authority.

Early 2019 - Letter was written to Solicitor 1 requesting the release of the original Will.

Early 2019 - As the deceased's child had refused to provide the original Death Certificate, an application was made to Office of Births Deaths and Marriages for copy of Death Certificate.

Early-to-mid 2019 - Death Certificate received from the Office of Birth Death and Marriages and a copy forwarded to Solicitor 1 as they required this to enable the release of the original Will.

Early-to-mid 2019 - Original Will received from Solicitor 1. Upon receipt of Death Certificate, letters forwarded to institutions holding estate assets seeking confirmation of estate holdings with responses received over subsequent weeks.

Mid- 2019 - The executor signs Probate application documents.

Mid- 2019 - Affidavit prepared and forwarded to Solicitor 1 to explain inconsistency with spelling of Deceased's name in Will.

Mid- 2019 - Signed Affidavit returned from Solicitor 1.

Mid- 2019 - Application for Grant of Probate and associated documents forwarded to Probate Office.

Mid- 2019 - Probate was granted.

Under the terms of the Will, the estate is to be divided into two parts and each part to be split as follows:

a) The first part to be divided:

- Two-thirds to the deceased's child.

- One-third to be divided between the deceased's grandchildren

b) The second part to be divided:

- Two-thirds to the executor; and

- One-third to one of the deceased's other grandchildren.

In late 2019, the deceased's child commenced Part IV proceedings in Supreme Court requesting further provisions from the estate.

Numerous court proceedings were required to remove the deceased's child from the property as outlined below.

In early-to-mid 2021, the executor issued proceedings in Supreme Court to recover possession of the property from the deceased's child.

In mid-2021, the Supreme Court orders that the executor recover possession of property, however the deceased's child refused to vacate the property.

In mid- 2021, the executor issue a warrant of possession for recovery of land.

In late 2021, the deceased's child finally vacated the property and the executor finally obtained possession of the property.

During this time, the property was not maintained and fell into disrepair. The executor together with family members hired a skip bin to clear out the property and cleaned up the property so it would be presentable for sale.

In late- 2021, the property was then listed for sale by real estate agency.

Previous attempts were made to sell the property as listed below:

(a)  In mid-to-late 2019, the executor had engaged with a real estate agency for a property appraisal and received a marketing proposal from the real estate agency a couple of weeks after this, however as the deceased's child refused to vacate the property, they were unable to proceed with this initial sale campaign.

(b)  In mid- 2020 a further property appraisal was undertaken by the same real estate agency with a view for auction to take place shortly after this, however as the deceased's child still refused to vacate the property, again the sale campaign could not proceed as planned.

The property sold in early 2022 and settlement occurred a couple of months after the sale contract was signed.

In early 2023, almost a year after the settlement of the property, the Part IV proceedings were finally settled.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 118-195(1)