Edited version of private advice

Authorisation Number: 1052180324603

Date of advice: 30 October 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) 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. Generally, repairs to the deceased's property that were undertaken to improve the condition it was in at the time of their death would not be a factor favourable to exercising the Commissioner's discretion. However, having considered all of your circumstances and the relevant factors the Commissioner will allow an extension of time in your case. The relevant considerations in your case included the following:

•                     Although repairs and renovations were undertaken, the vast majority were completed more than six months before the expiry of the two-year period. At that time you had then intended to put the property on the market in order to dispose of it within the two-year period but further COVID-19 restrictions were imposed. The remaining work that was undertaken was minor and was not the cause of any further delay.

•                     Your parent passed away while you were administering the deceased's estate and you were also made executor of your parent's estate so were responsible for administering two estates.

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:

XX XX 20XX

Relevant facts and circumstances

The deceased passed away on XX XX 20XX.

The property was the main residence of the deceased just before they passed away.

The property remained vacant and wasn't used to produce assessable income from the date of death.

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

The will appointed you as the sole executor of the estate and sole beneficiary of the property.

Probate was granted on XX XX 20XX.

Strict COVID-19 restrictions came into effect.

From XX 20XX real estate agents and property vendors may hold open house property inspections and on-site auctions.

On XX XX 20XX your parent passed away and you were appointed the executor of their estate as well so you were administering two estates.

From XX 20XX COVID-19 restrictions continue to ease.

The property title was transferred to you on XX XX 20XX.

You contacted a real estate agency to facilitate an inspection of the property.

The agency provided you with a list of repairs they recommended be completed, prior to their engagement, in order to sell the property.

The bulk of the repairs and renovations were completed more than six months prior to the expiry of the two-year period.

You had intended to put the property on the market at this time in order to dispose of the property within the two-year period but further COVID-19 restrictions were imposed in the relevant area.

Once these restrictions eased you attempted to engage the real estate agency but were advised there wasn't enough time to properly dispose of the property before the Christmas shutdown period.

You formally engaged real estate agency in XX 20XX.

Some minor work was undertaken while the property was being marketed but did not delay the sale.

The property was sold at auction on XX XX 20XX. You entered into a contract to sell the property on XX XX 20XX with settlement occurring on XX XX 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195