Edited version of private advice

Authorisation Number: 1052233151827

Date of advice: 18 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 ending 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 50% of their interest in the property before 20 September 1985, and they acquired the remaining 50% of their interest in 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.

At the time the deceased passed away, it was not known to their next of kin if they had a will. Multiple enquiries were made to various to confirm if a will existed. Ultimately, no will was located and the deceased was deemed to have died intestate.

One of the children of the deceased (and equal beneficiary under intestacy rules) passed away on DD MM 20YY. Multiple attempts were made to locate a will for them, who was ultimately also deemed to have passed away intestate. Letters of Administration were required for their estate in order to have a legal representative for their estate to consent to the deceased's application to the court for Letters of Administration.

Another child and beneficiary of the estate of the deceased was not immediately contactable and it took some time to locate them to serve notice of the application to her. They then refused to provide consent to the application.

Negotiations were required with the now located beneficiary regarding an amount they owed back to the estate due to money they had borrowed from the deceased. Review and negotiations were also required regarding potential borrowings by other beneficiaries.

Upon resolution of these issues, the application for Letters of Administration was lodged in MM 20YY. Letters of Administration were granted on DD MM 20YY.

After receiving the Letters of Administration, it was mutually agreed upon between the estate that another child and beneficiary to the estate would purchase the property from the estate. An independent valuation to come to an agreed value was conducted. This valuation was rejected by one of the children/beneficiaries and a second valuation was sought. The second valuation was also rejected, before a final valuation was completed and agreed upon by all beneficiaries.

A contract to sell the property was entered into on DD MM 20YY, with settlement occurring on DD MM 20YY.

The property has been used as the main residence of a child of the deceased since the deceased passed away until it was sold and has not been used to generate assessable income during that time.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195