Edited version of private advice

Authorisation Number: 1052227410357

Date of advice: 29 February 2024

Ruling

Subject: Deceased estate - Commissioner's discretion

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 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 ended XX XXXX 20YY

The scheme commenced on:

XX XXXX 20YY

Relevant facts and circumstances

In XXXX, the property was purchased (the Property).

The Property was purchased after 20 September 1985.

The address of the Property where the dwelling is located is XXX.

The Property is XXXm2 in size.

In XXXX, the Deceased executed their last Will

In XXXX, the Deceased was diagnosed with dementia

On XX XXXX 20YY, the Deceased passed away

The Property was the Deceased's main residence.

The Property was not used at any time to produce assessable income.

The Deceased was survived by their three children (the Parties); Person A, Person B and Person C.

Person A was living in the property caring for the Deceased before they died.

Person A continued to live in the Property after the Deceased had passed to look after it until it was sold.

The Parties were all named executors under the will.

Under the Will, the Deceased gifted the two properties equally to Person A and Person B as tenants in common.

One of these properties was the Property.

The residual of their estate was to be divided equally between Person A, Person B and Person C's two children.

The Deceased did not make any provisions for Person C.

Between the date of death and XXXX 20YY the parties were in the grieving process and needed some time to mourn before progressing to the formal stages of engaging lawyers to assist with the administration of the estate.

It took some months for the Parties to obtain the letter of capacity. Correspondence commenced XX XXXX 20YY and the letter was obtained XX XXXX 20YY.

Between XX XXXX 20YY to XX XXXX 20YY, the State/Territory government imposed significant restrictions on movements in response to COVID 19.

The beforementioned restrictions were when the State/Territory went into Lockdown 2 and had restrictions on movements outside of 5km from home and travel for only essential reasons.

Work undertaken by the Parties for the release of the Will commenced in XXXX up until XXXX.

At this time, Person B was experiencing health issues and homelessness.

There was trouble obtaining consent to progress the Probate application as the remaining executors were unable to contact Person B.

On XX XXXX 20YY, Person C filed proceedings in the Supreme Court seeking an order to deliver up the Deceased's last will.

On XX XXXX 20YY, the Supreme Court made orders for delivery of the Will.

On XX XXXX 20YY, probate was granted to the Parties as the name executors of the Will.

On XX XXXX 20YY, after Probate was obtained, Person C in their personal capacity filed court proceedings to seek further provisions from the estate.

The notices for the claim, had to be served personally to all the executors. Person C had difficulties in serving Person B and made numerous attempts (via a serving provider) between XX XXXX 20YY to XX XXXX 20YY.

On XX XXXX 20YY, Person B was eventually served, and advised the other two executors (via their lawyers) that they cannot participate in the proceedings.

On XX XXXX 20YY, mediation was conducted to settle the claim made by Person C in their personal capacity against the estate.

A settlement was reached between Person A and Person C through mediation.

As Person B was a listed party on the proceedings and did attend the mediation, the settlement required formal approval by the court.

On XX XXXX 20YY, Person A commenced proceedings in the Supreme Court to seek approval for the agreement reached in mediation on XX XXXX 20YY.

The proceedings also sought removal of Person B as an executor as they was unable to carry out their duties as an executor.

On XX XXXX 20YY, Person B filed court documents stating they did not consent to be removed as executor.

On XX XXXX 20YY, Person C's family provision claims were transferred from the County Court to the Supreme Court.

On XX XXXX 20YY, the Supreme Court made orders for Person C's family provision claims to go to judicial mediation on XX XXXX 20YY and trial on XX XXXX 20YY.

On XX XXXX 20YY, Person A and Person B put forward a position in relation to Person C's family provision claims.

On XX XXXX 20YY, Person C agreed with the position put forward and the Parties executed a deed documenting the terms of settlement to finalise Person C's family provision claims.

On XX XXXX 20YY, Person A made a further application seeking the court's approval of the terms of settlement dated XX XXXX 20YY.

On XX XXXX 20YY, the Supreme Court made orders to approve the terms of settlement.

Under the terms of agreement: Person C was to receive $150,000 inclusive of costs; Person C's children were to each receive a fixed sum of $50,000 from the estate in lieu of their entitlements under the Will; and the residual of the estate was to be divided between Person A and Person B equally.

When preparing the Property for sale the executors found that the Property was encumbered by a declaration of the Housing Commission.

The Housing Commission could declare that the house was unfit for occupancy and the Housing Commissioner could alter or demolish the house.

XX XXXX 20YY, the Property was listed for sale by auction.

XX XXXX 20YY, the executors signed a contract of sale

Settlement was delayed until the encumberment was removed.

On XX XXXX 20YY, the relevant federal member of parliament was contacted to remove the encumberment.

On XX XXXX 20YY, settlement occurred.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195