Edited version of private advice

Authorisation Number: 1052215844083

Date of advice: 25 January 2024

Ruling

Subject: Deceased estate - main residence exemption - Commissioner's discretion

Question 1

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 property and disregard the capital gain or capital loss made on the disposal?

Answer

Yes. Having considered the circumstances and relevant factors presented, the Commissioner will allow an extension. 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

On or around XX June XXXX, the deceased and their late spouse purchased the Property as joint tenants. The Property was situated on less than two hectares of land.

On XX August XXXX, Mortgagee-1 registered a mortgage against the title of the Property to secure a debt owing to Mortgagee-1 by the deceased's spouse.

On XX September XXXX, Mortgagee-2 registered a mortgage against the title of the Property to secure a debt owing to Mortgagee-2 in respect of unpaid amounts by the deceased's spouse.

On XX October XXX the deceased's spouse passed away and their ownership interest in the Property transferred to the deceased as the surviving tenant.

The deceased continued to live in the Property until they moved to a nursing home prior to their death.

On XX July XXXX the deceased passed away, leaving a Will appointing their dependant as Trustee and Executor (the Executor) of their estate.

The deceased passed away with outstanding debts still owed to Mortgagee-1 and Mortgagee-2.

In or around August XXXX, the Executor engaged lawyers to assist in obtaining Probate.

In or around November XXXX, a dispute arose relating to the quantum of the Mortgagee-2 debt, entitlement of Mortgagee-2 to charge interest in respect of the debt, and whether Mortgagee-2 was entitled to claim against the deceased's interest in the Property.

Between XXXX and XXXX, a specialist lawyer was engaged to assist with thorough investigation of matters relating to the dispute. History of the matter dating back to XXXX presented difficulties obtaining source documentation. Formal opinion was sought from a preeminent barrister. There were also dealings with Mortgagee-1 regarding enforcement of their mortgage against the title of the Property.

On XX January XXXX, the lawyers applied to Mortgagee-2 for full remission of interest and penalties relating to the debt.

On XX March XXXX, Mortgagee-2 approved remission of interest changes in full, settling the dispute.

On XX June XXXX Probate was granted to the Executor.

On XX August XXXX the Property was listed on the market for sale.

On XX August XXXX the Executor entered a contract for sale of the Property.

Settlement occurred on XX November XXXX.

The Property was rented to the deceased's grandchild at the time of the deceased's death. They ceased paying rent immediately on the passing of the deceased but continued to reside in the Property until mid-XXXX.

The Executor and their spouse lived in the Property as their main residence from mid-XXXX until October XXXX when they vacated the property due to the sale.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195