Edited version of private advice

Authorisation Number: 1052228131862

Date of advice: 1 March 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 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 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased passed away on DD MM 20YY.

The dwelling is located at XXXX (the property).

The deceased acquired the property after 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.

The property was purchased as tenants in common with their spouse, each with an equal ownership interest in the property.

The will of the deceased provided their spouse a life interest in the property, while their spouse continued to hold their own 50% interest in the property. The will also stipulated that after the life interest in the property ended 50% interest in the property held by the deceased would pass to the daughter of the deceased. As their spouse would still own their 50% share, any sale of the property would need to be agreed and coordinated amongst the spouse and the daughter of the deceased.

The spouse remained in the property until shortly before the property was sold. During the last quarter of the preceding year, the spouse's health had deteriorated. A family member began acting on behalf of the spouse under appointment of an enduring power of attorney. It was during this time that the spouse was moved out of the property and into an aged care facility. The property needed to be sold.

There was a dispute between the two parties as to the existence and nature of the spouse's rights over the property - specifically how much of the proceeds of the sale the spouse would be entitled to. This is attributed to the wording in the will of the deceased being arguably ambiguous and open to interpretation.

The spouse's party was reluctant to formally accept the extinguishment of the spouse's life interest until the dispute was resolved. The spouse did not formally end their life interest until the sale contract for the property was signed. The dispute is still under review at the time this ruling is issued.

The property was listed for sale in early 20YY, and it was sold under a contract dated DD MM 20YY, with settlement occurring on D MM 20YY.

The property has not been used to produce assessable income at any time between the date the deceased passed away and when it was sold.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195