Edited version of private advice

Authorisation Number: 1052212123567

Date of advice: 22 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 (ITAA 1997) 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. 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 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased passed away on XX/XX/20XX.

The deceased was a resident of Australia for taxation purposes.

The deceased owned a property (the property) that was acquired 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.

On XX/XX/20XX, the deceased made alterations to their will which was originally dated XX/XX/20XX. The alterations were made by hand and were not witnessed.

As a result of the deceased altering their will, there were challenges to the validity of the will which caused a delay in the grant of probate.

In XX/20XX, the executor engaged with Firm A about applying for probate. During this time, the executor also made enquiries with a real estate agent to sell the property, however no action was able to be taken until probate was granted.

On XX/XX/20XX, the executor submitted the probate application to the Supreme Court of State A.

On XX/XX/20XX, the probate application was declined. Additional documentation was requested by the courts including an affidavit from those affected by the grant of probate and proof that the deceased had testamentary capacity at the time that they made the will on XX/XX/20XX. The executor found that it was difficult to source these documents due to Covid-19 restrictions in State A and was not able to obtain the required documents during this time.

On XX/XX/20XX, the executor initially contacted the deceased's family doctor to provide an affidavit to state that the deceased had testamentary capacity at the time of making the will. A draft affidavit was prepared; however, as the deceased's doctor did not test the deceased specifically for testamentary capacity, they were not able to provide a formal affidavit.

On XX/XX/20XX, the executor notified that relevant parties on how the updated will would affect their entitlement and requested their consent to the updated will.

On XX/XX/20XX, Firm A were notified by some of the beneficiaries, of their intention to challenge the will and court proceedings were initiated.

On XX/XX/20XX, the executor filed a Notice to Produce in the Trusts Equity and Probate List of the Supreme Court.

On XX/XX/20XX, leave was granted to the affected beneficiaries to apply to be added as defendants to the plaintiff's application.

On XX/XX/20XX, the beneficiaries applied to be added as defendants and were added by Orders of the Court.

Between XX/XX/20XX and XX/XX/20XX, the affected parties each filed an affidavit.

A directions hearing was scheduled for XX/XX/20XX; however, this was adjourned until XX/XX/20XX.

On XX/XX/20XX, all affected parties had consented to the Register of Probate for the outcome of probate to be determined.

On XX/XX/20XX, the executor contacted, a family friend of the deceased and Justice of the Peace to obtain an affidavit. The affidavit was signed on XX/XX/20XX. Between XX/XX/20XX and XX/XX/20XX, the consent and affidavit were submitted to the Probate Registrar.

Probate was granted on XX/XX/20XX.

On XX/XX/20XX, the executor engaged with a real estate agent to prepare the property for sale.

On XX/XX/20XX, the property was listed on the market to be sold at auction on XX/XX/20XX.

The property was left vacant after the deceased passed away.

The executor did not undertake any renovations on the property.

You entered into a contract to sell the property on XX/XX/20XX with settlement occurring on XX/XX/20XX, approximately X years after the date of death.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 118-195