Edited version of private advice

Authorisation Number: 1052264026462

Date of advice: 20 June 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 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 30 June 20XX

The scheme commenced on:

XX XX 20XX

Relevant facts and circumstances

The deceased passed away on X XX 20XX.

At the time of the deceased passing, the deceased owned a property located at XX (the property).

The property is less than 2 hectares in size.

The deceased acquired their ownership interest in the dwelling on XX 19XX.

The property was the main residence of the deceased until their passing.

The property was never used for the purpose of producing income during the deceased ownership.

The deceased lived with his spouse. The spouse continued to live in the property until their passing on the XX 20XX.

A copy of the deceased will, was supplied in application.

Under the will, the spouse was granted a two-year right to reside in the property from the date of the deceased's death.

According to the deceased's will, XX% of the estate was bequeathed to the spouse and 30% each to the two adult children XX and XX.

The children were appointed as the executors of the will.

Probate was granted on X XX 20XX.

Due to the spouse's severe disability, and their dependence on a carer. The executors did not enforce the spouse's removal from the property after the will's two-year right to reside expired.

The executors explored the possibilities of the spouse vacating the property within the two-year period. Their lawyer advised it was extremely unlikely the courts would evict the spouse.

The executors contacted the spouse, suggesting the need to comply with the deceased's will by selling the property.

The spouse responded, indicated their strong refusal to move.

The executors had little choice but to allow the spouse to remain in the house indefinitely.

The spouse passed away on XX 20XX.

The executors commenced the sale process, engaging a real estate agent and undertaking necessary minor repairs.

Minor repairs to the property included:

•         replacing broken roof tiles

•         plastering and painting areas of the ceiling that had water damage

•         fixing gutters

A total of $XXX was used for these repairs.

A copy of the certificate of title was supplied in the application.

A caveat was placed on the property on XX 20XX by the carer, who was the sole beneficiary of the spouse's will.

The carer was in possession of a title transfer document for the property signed by the deceased prior to his passing, granting XX% ownership to the spouse.

The title transfer document had been stamped but not lodged and not seen by the executors.

After extensive negotiations the executors and the carer came to an agreement.

The executors and the carer agreed on the deceased original will splits.

The property was placed on the market as soon as legally possible post negotiations.

The property was sold by the executors of the deceased estate.

A contract to sell the property was entered into on X XX 20XX.

The property was settled on X XX 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195