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Edited version of private advice
Authorisation Number: 1052222797535
Date of advice: 15 February 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 (subject to the 2 hectare limitation) and disregard the capital gain or capital loss you made on the disposal?
Answer
Yes. The Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit. However, the maximum area of land that is covered by the main residence exemption (including the area under the dwelling) must not exceed 2 hectares.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
The deceased acquired a dwelling prior to DD MM 19YY.
At the time the deceased passed away, the dwelling was being leased to an unrelated party.
The dwelling was situated on more than two hectares of land.
Probate was granted around 3 months after the date of death.
At the time the deceased passed away, the property was owned as multiple separate lots/titles. Prior to their passing away, the deceased lodged a development application with the local council to subdivide the lots further.
The will of the deceased bequeathed the lots in their post-application titles, however at the time the deceased passed away the application had not been finalised. As such, there was not a legal boundary to those contemplated titles and the estate could not be administered in accordance with the will.
The executor undertook a large amount of work to finalise the development application and to comply with the consent conditions imposed by the council. They had no expertise or experience in this area which contributed to delays in the process.
The development application was approved over 3 years after the date of death, and the new lots were registered in the name of the executor. The lots were subsequently transferred to the beneficiaries in accordance with the will of the deceased.
Around this time the local area was impacted by significant flooding.
The beneficiary advertised one of the bequeathed lots for sale within 12 months of receipt of the title. A contract was entered into for the sale of this lot on DD MM 20YY, with settlement occurring on DD MM 20YY.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-195