Edited version of private advice

Authorisation Number: 1052193663962

Date of advice: 20 November 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 the Administrator to dispose of the ownership interest in the dwelling owned as trustee of the deceased estate and disregard the capital gain or capital loss 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 private ruling applies for the following period:

Income year ending XX MONTH 20XX

The scheme commenced on:

XX MONTH 20XX

Relevant facts and circumstances

The Deceased passed away on XX MONTH 20XX.

The Deceased left a Will dated XX MONTH 20XX.

Probate was granted on the XX MONTH 20XX.

The Deceased and their spouse, who passed away on the XX MONTH 19XX, acquired the Property on the XX MONTH 19XX.

The dwelling was the main residence of the Deceased and not used for the purposes of producing assessable income before his death.

The land adjacent to the dwelling is less than two hectares in area.

The Deceased has children.

The Deceased appointed Executors and Trustees of the Estate in their Will dated XX MONTH 20XX.

One of the children (the Child) has suffered from a chronic illness for many years and has been hospitalised several times due to this illness. Other children have Power of Attorney and Enduring Guardianship for the Child.

The Child lived in the Property for many years with their parents who looked after them as their primary day-to-day carers and continued to live alone in the Property home after the parents' deaths.. The Will did not grant the Child the right to do so. However, in a letter dated XX MONTH 20XX a doctor stated:

l believe a move to a temporary rental accommodation at this stage until their own house is completed is not in the best interest for the Child's health. It has the potential to unsettle them with possibility of relapse of their longstanding illness.

Due to the loss of the parents and the Child's Medical condition, the Executors were concerned that by removing the Child from the family home before they could come to terms with their loss could result in a relapse and possible hospitalisation as per advice from the Child's doctor. The Child needs routine and stability in their life. They cannot cope with being over stimulated with changes and decisions all at once.

The Deceased's Will provided instructions to set up a fund to allow the Trustees in their absolute discretion to acquire or lease property for occupation, use or enjoyment by the Child, whether alone or with some other person or persons.

The trustees for the Child purchased an off the-plan house and land package from a company (the Company) to construct a new home for the Child to live in as their main residence. The decision was informed by the following factors:

• During this time, all the properties you looked at within the same price-point required a lot of work and maintenance, as they were very old. On viewing these properties, the Child became agitated and stressed about the work involved and due to their illness and cannot be relied upon to take responsibility to maintain the upkeep and expenses of an older property.
• You decided, based on the price of houses at the time, that the Company's offer was the cheaper option for a new single storey small home. The Child requires a single storey home because of health issues. A new home also meant there would be no maintenance. Also, if they need assistance, which is often, it's much closer for the family members to get to the home.
• Purchasing an off the plan house also meant that the property is under a warranty for several years. Should there be any issues that arise, the builders are responsible to amend not the Child who is not capable of doing any household maintenance and repair and other family members are not able to provide assistance.
• While the land was being registered and the new home was being built it gave time for the Child to grieve their parents and adjust to life without the parents in the Property.
• You would take the Child for drives to the new area to become familiar with the local shopping centre, facilities in the area and the local parks.
• The Child has been at the new home since XX MONTH 20XX and is settled there.

Purchasing the off the plan house, shortly after the Deceased's death, you did not foresee the delay in registering the land. It took longer than expected due to a Covid lockdown. You expected it would take X months for the land to be registered and this was not the case. There were also delays in obtaining housing supplies when building eventually commenced and shipping delays caused by Covid.

The timeline for the construction of the house is as follows:

• XX MONTH 20XX Signed a building contract with the Company to construct a single-story dwelling for $X
• XX MONTH 20XX Exchanged contracts for the purchase of the land for $X
• XX MONTH 20XX Settlement for purchase of the land.
• XX MONTH 20XX DA approved by the City Council
• XX MONTH 20XX Certifier issues Construction Certificate
• XX MONTH 20XX the Company advised practical completion
• XX MONTH 20XX the Child moved into the new residence
• XX MONTH 20XX Certifier issues Occupation Certificate.

Contract for sale of the Property by the Executors were exchanged on the XX MONTH 20XX and Settlement occurred on the XX MONTH 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 118-195