Edited version of private advice

Authorisation Number: 1052197948182

Date of advice: 7 December 2023

Ruling

Subject: Commissioner's discretion - deceased estate

Question

Will the Commissioner exercise the discretion under subsection 118-195 (1) of Income Tax Assessment Act 1997 to allow an extension of time for you to dispose of your ownership interest in the dwelling and disregard the capital gain 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 ending 30 June 2023

The scheme commenced on:

17 June 2015

Relevant facts and circumstances

Sometime prior to 20 September 1985 Person A and their spouse acquired a property (the Property) as joint tenants.

The Property consisted of a dwelling and attached land under two hectares.

Person A and their spouse lived in the dwelling as their main residence.

Shortly after 20 September 1985 Person A's spouse passed away, and their share of the Property passed to Person A.

Person A continued to live in the dwelling as their main residence.

Person A passed away (the Deceased).

The Deceased's child, (Child A) also lived in the dwelling with the Deceased.

Child A was the Executor of the Deceased's Estate.

On XX September 20XX probate was granted.

The Deceased's will included a right for Child A to reside in the dwelling for their life or until they no longer wished to, subject to certain conditions being met.

The Deceased's children, Child A, Child B and Child C were remainder beneficiaries.

On XX November 20XX Child A passed away. They were still living in the Dwelling at the time of their death.

Child A's will had named the Deceased as both the Executor and the sole beneficiary of Child A's Estate. As the Deceased has predeceased Child A, Letters of Administration needed to be lodged.

In February 20XX, Child B travelled to City A to sign the documents required to start the process of applying for Letters of Administration fort Child A's Estate.

Child A's documents needed certified translation from a different language. Child C, who lives in City B, filled out forms incorrectly on two occasions.

The solicitor lodged the incorrectly signed documents with the Letters of Administration application with an accompanying explanatory note.

On XX April 20XX further Supreme Court Requisitions were received. Child A's Will had not been updated since 20XX. Further bank searches for a will were required, along with two affidavits from Child B.

On XX June 20XX the Requisitions were responded to.

On XX July 20XX, Letter of Administration were granted to Child B (Legal Person Representative).

As Child A had been the sole Executor of the Deceased's Estate, Child B in their role as Legal Person Representative (LPR) for Child A's Estate, became the LPR of the Deceased's Estate.

On XX August 20XX a contract was signed with a real estate agent to sell the Property.

On XX August 20XX the Property was listed for sale with an asking price of $X, based on advice from the real estate agent. Open houses were held every week for the first 8 weeks and then every second week until the first week in December 20XX.

No work had been done to clear the Property's yard as it wasn't considered necessary to get it sold.

The demand for property (and therefore property prices) in City A had risen considerably during the COVID pandemic, however as many people returned to their homes and offices in other cities and interest rates rose, the demand for properties in City A slumped.

After some initial interest shown in the Property the slump in the market was evident. On many occasions no-one attended the open for inspections held for the Property.

In December 20XX, in order to attract buyers to the Property, it was decided that the yard needed to be cleared. This involved spraying, slashing, cutting and removal of all waste.

On XX February 20XX, having cleared the yard making it more presentable, the asking price was reduced to a range of $XX.

On XX February 20XX an offer of $XX, was received. This was the only offer that had been received for the Property to date. The offer was negotiated up to $XX.

On XX March 20XX contracts were exchanged.

On XX April 20XX settlement occurred.

A capital gain was made on the disposal of the Property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195

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