Edited version of private advice

Authorisation Number: 1052248425552

Date of advice: 6 May 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 Your client to dispose of their 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:

XX XXX 20XX

Relevant facts and circumstances

The deceased passed away on XXXX.

The deceased died intestate.

The deceased purchased the property on XX XXX 19XX (post CGT).

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

The deceased went into an aged care facility a few months before they passed away.

The property was less than two hectares in size.

The property was never used to produce assessable income.

The property remained vacant from the date of death until it was sold.

Letters of administration were granted by the Supreme Court to the deceased's relative.

The reason for the delay in selling the property within the legislated two year time period are as follows:

•         The deceased died intestate.

•         The deceased's beneficiaries were not able to initiate probate - all being elderly, unwell, including one in aged care.

•         The deceased estate was complicated, with the deceased's records having fallen into a state of disarray due to the onset of dementia in the years leading up to their death.

•         The deceased's relative initiated probate having been their primary administrator and support in the months leading up to their death.

•         The gaining of probate was complex and was also impacted by illness. Locating multiple documents to enable probate lodgement to occur was also lengthy. This was additionally complicated by another of the deceased's relatives also becoming unwell, during the COVID-19 pandemic lockdowns.

•         Despite the probate application finally being lodged in 20XX with the assistance of a lawyer, probate was not actually granted until the following year.

Once probate was granted to the deceased's administrator, a series of further unforeseen events ensued, delaying the sale of the property, this included:

•         The administrator had an additional death in the family

•         The administrator had a dependant parent to monitor and care for

•         The administrator was diagnosed with a medical condition requiring major surgery and multiple months of recovery.

•         Pandemic lockdowns and movement restrictions, precluded property clearing and sale preparation

•         Mortgage discharge hadn't occurred. Discharging the mortgage and obtaining the property title took multiple months to resolve and was also hindered by the pandemic lockdowns.

•         Property clearing and sale preparation was able to occur in early 20XX with restrictions lifted, mortgage discharge received, and the administrator was well enough to arrange for the property to be sold.

•         The property was sold, however the buyer requested multiple extensions to the agreed settlement date, and then ended up defaulting on the sale altogether despite the extensions.

•         The administrator instructed the lawyer to issue a rescission notice on the purchase, ending the sales contact.

•         The house was relisted for sale and sold, with settlement occurring several weeks later.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195