Edited version of private advice

Authorisation Number: 1052253841351

Date of advice: 21 May 2024

Ruling

Subject: Commissioner's discretion - deceased estate

Question

Will the Commissioner exercise the discretion under section 118-195 of 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 ended XX XXXX 20YY

The scheme commenced on:

XX XXXX 20YY

Relevant facts and circumstances

The deceased passed away on XX XXX 20XX.

The deceased acquired the property after 20 September 1985.

The property is less than 2 hectares in size.

The property was the deceased's main residence at the time of their death and was not used to produce assessable income at this time.

On XX XXX 20XX, the deceased executed their will.

The deceased appointed their children, Person A and Person B as co-executors.

The will also stated, should my child refuse or for any reason be unable to act, I appoint my child Person C and Person D as co-executors.

The will did not specify which child was referred to as 'my XX'.

There was no right to occupy the dwelling under the deceased's will.

The four beforementioned children of the deceased were the beneficiaries under the will.

Person B lived in the dwelling with the deceased prior to their death.

Person A passed after the deceased.

Person A had not applied for probate, of the deceased's estate, prior to their death.

Person B was originally planning to make the probate application however they were not on good terms with Person A and their family and so could not get access to the death certificate.

Person B continued to live in the dwelling, after the deceased's death, without the permission of the other beneficiaries.

Person B stated their reason for not leaving the dwelling as financial struggles.

In XXX 20XX, Person C and Person D approached Firm A to engage Person B and their solicitors (Firm B) to apply for probate and administer the estate.

On XX XXX 20XX, Firm A emailed Person B requesting a copy of the will. Firm A requested that Person B provide a copy of the deceased's last will and any previous wills, and if the will was held with a solicitor to provide the details so they could contact the solicitor directly. Multiple follow up emails and telephone messages occurred.

On XX XXX 20XX, Firm A received a notice that Firm B were acting on behalf of Person B and provided a copy of the will. Firm B advised that they had not sighted the original will which was held by Firm C. Firm C would not release the original will without proof of Person A's death.

On XX XXX 20XX, Firm A requested Firm B provide a progress update on obtaining the original will.

On XX XXX 20XX, Firm B advised they were having difficulties obtaining the original will from Firm C. Firm C advised that they would not release the will without proof of death of the other co-executor (Person A).

In XXX 20XX, Firm A obtained Person A's death certificate, and the original will (of the deceased) was released.

On XX XXX 20XX, Firm B advised Firm A that they were trying to get instructions from Person B about making an application for probate of the will.

Between XXX and XXX 20XX, correspondence was sent to Firm B requesting an update, however no response was received.

On XX XXX 20XX, Firm A emailed Firm B advising that their searches indicated that Person B had not made any attempts to obtain a grant of probate of the will in their possession. Firm A also advised Firm B that they would take formal action if Person B did not apply for probate within 3 weeks.

On XX XXX 20XX, Firm B responded to Firm A stating they were having trouble receiving instructions from Person B.

On XX XXX 20XX, Firm B advised Firm A that they have received instruction to apply for probate. When preparing the documents Firm B noticed that clause 1 of the will did not entitle Person B to act as an executor on their own. Firm B believed that Person C and Person D were the executors appointed under the will.

On XX XXX 20XX, Firm A responded to Firm B that they had an informal discussion with a barrister regarding the approach to apply for probate. Firm A suggested that all three apply for the grant.

On XX XXX 20XX, Firm B replied to Firm A advising that due to the relationship between their clients it would be preferable for Person C and Person D to apply for the grant of probate.

On XX XXX 20XX, Firm A requested Firm B provide the original documents to enable Person C to apply for a grant of probate.

On XX XXX 20XX, the original documents were forwarded to Firm A by post.

On XX XXX 20XX, Firm A received the original will and death certificate.

On XX XXX 20XX, Firm A sent correspondence to the Registrar of Probates requesting guidance on the executor clause in the will.

On XX XXX 20XX, the Registrar of Probates responded to Firm A indicating they should seek counsel advice regarding the wording in the will 'should my XX' (singular) with no confirmation of which child this referred to.

On XX XXX 20XX, Firm A forward a Brief for Advice document to a barrister. Paragraph 8 of the document states that the solicitors acting for Person C are refusing to apply for probate. Stating their client is ineligible to apply as Person A is deceased, and due to the will stating, 'should my XX' (singular) with no confirmation of which child this referred to.

On XX XXX 20XX, Firm A received advice from the barrister. The advice provided three possibilities:

•         Person A and Person B are required to act as co-executors, meaning that if one cannot act Person C and Person D are substituted as co-executors;

•         Person B is entitled to act alone;

•         The use of 'my XX' where there are in fact two XX renders the entire executorial clause void for uncertainty.

The barrister advised that in their view, 'there is sufficient certainty in the wording that Person C and Person D can act as executors, and they might seek to advertise and apply for probate'. 'It would seem desirable to have Person B formally renounce probate or at lease confirm he is unwilling to act in writing'.

On XX XXX 20XX, the notice of intention to apply for probate was advertised on the Supreme Court website.

On XX XXX 20XX, the Supreme Court rejected the application for probate. The registrar of probates was not prepared to accept the application in its original format and renunciation documents from Person B were required.

On XX XXX 20XX, the Supreme Court received the renunciation of probate documents from Person B. On the same day the Assistant Registrar of Probates advised that they had reviewed the application and advised that as Person B had renounced probate their situation needed to be advertised and sworn to. The plaintiff can now apply as a beneficiary under the will.

On XX XXX 20XX, the application was re-advertised on the Supreme Court website.

On XX XXX 20XX, the Supreme Court in its Probate Jurisdiction granted the letters of administration to Person C.

On XX XXX 20XX, Firm A advised Person C that as per a meeting in XX the property must be sold to pay the debts of the estate. Firm A also advised Person B that the estate was providing a formal notice of eviction from the property. Person B requested further time as they had no alternative accommodation.

On XX XXX 20XX, an agreement was reached with Person B to move out of the property on XX XXX 20XX.

On XX XXX 20XX, Firm A was provided a restricted valuation assessment for the property.

On XX XXX 20XX, an estate agent was engaged to sell the property.

In XXX 20XX, Person B moved out of the property.

On XX XXX 20XX, a contract of sale was entered with the purchasers and Person C, as the legal personal representative of the estate of the deceased.

On XX XXX 20XX, the property was settled.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195