Edited version of private advice

Authorisation Number: 1052209047552

Date of advice: 11 January 2024

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 you dispose of your ownership interest in the dwelling and disregard the capital gain or loss made on disposal?

Answer

Yes, having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time.

Generally, we will allow a longer period where the dwelling could not be sold and settled within 2 years of the deceased's death due to reasons beyond your control that existed for a significant portion of the first 2 years.

Factors that would weigh in favour of allowing an extension include the following:

•                     the ownership of the dwelling, or the will, is challenged

•                     a life tenancy or other equitable interest given in the will delays the disposal of the dwelling

•                     the complexity of the deceased estate delays the completion of administration of the estate

•                     settlement of the contract of sale of the dwelling is delayed or falls through for reasons outside of your control, or

•                     restrictions on real estate activities imposed by a government authority in response to the COVID-19 pandemic.

Factors that would weigh against allowing an extension include the following:

•                     waiting for the property market to pick up before selling the dwelling

•                     waiting for refurbishment of the dwelling to improve the sale price, or

•                     inconvenience on the part of the trustee or beneficiary to organise the sale of the dwelling, or unexplained periods of inactivity by the executor in attending to the administration of the estate

This ruling applies for the following period

Year ending DD MM 20YY

The scheme commenced on:

DD MM 20YY

Relevant facts and circumstances

The deceased acquired a property before 20 September 1985.

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

The property was not used to produce assessable income before or after the date of death.

The property was situated on less than two hectares of land. The executors had difficulties evicting the deceased's relatives from the property causing delay in accessing the property.

The estate was left in a very poor condition.

A large number of the deceased's heavy plant and equipment needed to be sold and removed from the site.

Covid 19 lockdown intervened for several months and prevented one of the executors from attending the site.

Significant maintenance to the property was needed to get it to a presentable condition, ready for sale.

Executors had to remove a shed and carport that had been illegally installed by a relative of the deceased.

Executors spent many hours of their time including every weekend over a long period to get the house ready for sale.

The situation impacted negatively on the health of both executors.

Two years and two months after the deceased passed away a contract to purchase the property was signed.

Settlement for the sale of the property occurred in the same month.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195