Edited version of private advice

Authorisation Number: 1052188429369

Date of advice: 6 November 2023

Ruling

Subject: Commissioner's discretion - deceased estate

Question 1

Will the Commissioner exercise the discretion under section 118-195 of the Income Tax Assessments Act 1997 (ITAA 1997) to allow an extension of time for you to dispose of your ownership interest in the dwelling acquired from Person 1's estate and disregard the capital gain or capital loss you made on the disposal?

Answer

Yes.

Question 2

Is the disposal of the interest in the property acquired from Person 4's estate eligible for full exemption under section 118-195 of the ITAA 1997?

Answer

Yes.

This ruling applies for the following period:

Year ended XX XXXX 20YY

The scheme commenced on:

XX XXXX 20YY

Relevant facts and circumstances

The property was acquired by the grandparents before 20 September 1985.

The grandparents passed away in 19YY and 19YY left equal shares of the property to Person 1, Person 2, Person 3 and Person 4.

The property interests were held as tenants in common.

Before 1985, Person 3 sold their share of the property to Person 1, Person 2 and Person 4.

Person 1 passed away on XX XXXX 20YY.

Person 1's will left their equal share in the property to Person 5 and Person 6.

Person 1's will detailed a right to occupy to Person 2 and Person 4.

Person 2 passed away on XX XXXX 20YY.

Person 4 passed away on XX XXXX 20YY.

Person 4 left their shares in the property to Person 5, Person 6 and Person 7.

Probate for Person 4 was granted on XX XXXX 20YY.

Person 6 was appointed as executor and trustee of Person 4's estate.

Person 5, Person 6 and Person 6 lived in separate states to the property.

In March 20YY, a gardener, plumber and electrician were hired to complete repairs on the property.

In April 20YY, a plumber had completed repairs to the roof and the beneficiaries began sorting, packing and cleaning the house.

In May 20YY, an appointment was made with a real estate agent.

In August 20YY, additional sorting, packing and cleaning of the property continued.

Person 4's estate was finalised on XX XXXX 20YY.

In September 20YY, further sorting of household goods, packing and cleaning occurred.

In October 20YY, a plumber repaired the toilet and the real estate agent was consulted.

In November 20YY, repairs for the properties roof were completed and the real estate agents sales campaign began.

In January 20YY, various open homes were completed in preparation of the property to sell.

In February 20YY, an auction of the property was unsuccessful as no bids were made.

The buyers pool was reduced due to the nature of the property.

In March 20YY, a potential buyers building inspector visited the property and estimated repairs to the property of a significant proportion of the sale price.

The repairs quoted by the building inspector were not remedied before the sale.

On XX XXXX 20YY a contract of sale was entered into and settlement was effectuated on XX XXXX 20YY.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195

Reasons for decision

Question 1

Will the Commissioner exercise the discretion under section 118-195 of the ITAA 1997 to allow an extension of time for you to dispose of your ownership interest in the dwelling acquired from Person 1's estate and disregard the capital gain or capital loss you made on the disposal?

Summary

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'.

Detailed reasoning

The deceased acquired the property before 20 September 1985.

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 property was situated on less than two hectares of land.

The deceased's will granted a life interest in the property to an individual which created a legal impediment to the sale of the property while this individual enjoyed this right to occupy. This impediment to sale existed for a significant portion of the ownership period until this individual passed away.

Upon the impediment to sales extinguishment the beneficiaries began repairs and cleaning of the property to prepare it for sale. We consider that the property was sold as soon as practically possible in consideration of the delaying factors. We also consider that the property was actively managed until completion while overcoming these delaying factors.

The property was listed for sale after the impediment to sale had been relinquished and the associated delaying factors were overcome. You entered into a contract to sell the property on XX XXXX 20YY with settlement occurring on XX XXXX 20YY.

Question 2

Is the disposal of the interest in the property acquired from Person 4's estate eligible for full exemption under section 118-195 of the ITAA 1997?

Summary

Yes.

Ownership of the property interest was ended within two years after the deceased's date of death and the other full exemption conditions are satisfied for this interest, therefore the interest acquired from this estate is fully exempt.