Edited version of private advice

Authorisation Number: 1052247530227

Date of advice: 6 May 2024

Ruling

Subject: CGT - 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 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

The deceased passed away several years ago.

The deceased acquired the property a number of years ago.

The property was the deceased's main residence just before they passed away.

The deceased entered an aged care facility a couple of years before they passed away.

The property was rented out starting shortly before the deceased passed away.

The property remained vacant from when the deceased entered the aged care facility until it was rented.

The property was rented to assist with the costs associated with the aged care facility and when the deceased passed away to assist with the costs of the property and estate expenses.

The executor of the estate made an election under section 118-145 of the ITAA 1997 to continue treat the property as the deceased main residence up until the date of death.

The property was less than 2 hectares in size.

The property settled a few years after the date of death.

The reasons for the property not being sold within the 2 year time period allowed under the legislation is as follows:

The executor was in a different State.

Due to Covid restrictions put in place in both States, executor was not able to travel to attend to administration matters, with significant delays incurred relating to provision of documents by Australia Post.

Lawyers were contacted in a few months after the deceased passed away and formally engaged to assist with Probate of the Estate, after confirming probate registry requirements and Executor confirming status of the deceased's siblings Estate.

All documentation requested by lawyer was required to be provided in hard format, via Australia post, with delays encountered.

The executor was advised by lawyer that grant of probate had been applied for, but delays were encountered due to Covid and awaiting probate finalisation of the deceased's siblings' Estate, to which they were a beneficiary.

The executor continually requested updates from the lawyers as to the progress of the granting of Probate.

Advised affidavits would be required, signed in the presence of a JP (severely restricted in obtaining due to Covid protocols) and delivered in hard copy (further delays due to Covid restrictions and Australia Post delays).

The executor continually contacted the lawyer, finally being advised that affidavits and amended probate application had only just been lodged (a delay of several months from when Executor provided the documents), with no correspondence being received.

The lawyers advised the Executor that they are closing their practice and recommend another firm to take over the case.

A new lawyer was appointed by the executor.

The relevant file was provided to new lawyers from the previous firm with missing documentation.

An updated probate application was lodged.

There were further delays in providing additional materials, with Probate granted several months after the new application.

There was a requirement to wait several months from date of probate for any potential provision of claim on assets.

The beneficiaries of the Estate enter discussions and negotiations around acquisition of various assets, with disagreements arising.

The executor was sick and was hospitalised in the middle of the year, delaying discussions, as well as the executor being required to travel overseas for a few weeks as part of their employment.

Independent valuers were appointed to value the real estate assets so beneficiaries can move forward with distributions of the Estate.

There were various discussion/correspondence between accountants and lawyers, with Deed of Family Settlement finally agreed on and signed at the end of the year.

There were delays encountered with the Bank relating to discharging of an historical mortgage and the State Revenue office processing due to the complexity of the transfer.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195