Edited version of private advice

Authorisation Number: 1052243062864

Date of advice: 18 April 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 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 2024

The scheme commenced on:

1 July 2023

Relevant facts and circumstances

The Deceased passed away a few years ago.

The dwelling was the Deceased's main residence just before they passed away.

The Deceased built the dwelling before 1985.

The dwelling is situated on less than 2 hectares of land.

The dwelling was never used to produce assessable income.

Probate was granted approximately 12 months after the Deceased's death to one of the Deceased's adult children (Executor).

The sale of the dwelling was settled approximately two years and 10 months after the Deceased's death.

The circumstances of the delay in selling the dwelling were as follows:

The Executor was living in overseas when the Deceased passed away. The Executor was unable to travel in 2020 and 2021 due to the severe lockdowns caused by the global COVID-19 pandemic. Processing the probate application remotely from overseas resulted in complications which led to probate taking 12 months to be received by the Executor.

The Deceased's other adult child (Z) lived with the Deceased in the dwelling prior to the Deceased's passing. Z had a major accident when they were young and became physically impaired. Z also suffered intellectual and cognitive damage because of the accident and has been a disability pensioner since early adulthood. They also developed a significant hoarding problem.

After probate was granted, the Deceased's bank accounts were then closed relatively quickly. However, Z continued to reside in the dwelling as it was necessary to deal with them extremely delicately because they were prone to becoming very agitated and upset when facing a significant change in circumstances. Preparing the house for sale proved delicate and time consuming as a significant amount of Z's hoarded belongings would need to be removed and disposed of before sale. The process of dealing with Z to get them used to the idea of the necessary tasks took some time.

It was then necessary to liaise with a real estate agent to explain these circumstances and find a suitable property buyer who would be flexible to permit Z to remain living in the house after settlement until such time as they had purchased a new property.

The dwelling was placed on the market for sale with a real estate agent approximately two years and nine months after the Deceased's death.

The contract provided for Z to reside in the house rent free for a few months after settlement to provide sufficient time for them to purchase another house in that time frame.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195