Edited version of private advice

Authorisation Number: 1052266184401

Date of advice: 1 July 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 XX June 20XX

The scheme commenced on:

XX July 20XX

Relevant facts and circumstances

Name of the deceased - Client A.

The date the deceased passed away - XX February 20XX.

The property address - Property A.

Property size - XXX square metres.

The deceased acquired the property in November 19XX.

Property A was not the main residence of the Deceased just before the date of death. The Deceased had moved into a nursing home in October 20XX.

Property A was not used to produce assessable income at the time of death. The Deceased's child, Client C resided in the unit and was not paying rent.

The Deceased's other child, Client B is the Executor and administrator in the Will, holding the only asset which is the aforementioned Property A.

Property A was settled on the XX February 20XX for $XXX,XXX outside of the 2-year rule.

Property A was sold by Client B as the Executor and beneficiary described in the will.

The Executor advises that the sale was delayed due to circumstances outside their control.

Reason for delay in sale of Property A

The Executor's relationship with Client C became fractured after the death of Client A.

The Client C resided in the unit with Client A for several years before they went into a nursing home in October 20XX, prior to Client A's death in 20XX.

Client C would not commit to buy Client A's interest in Property A, nor would they sell the unit.

Client C resided in the unit rent free until June 20XX.

Client C refused to engage with Client B, due to this, proceedings were issued with the Supreme Court seeking that Client C give vacant possession of Property A and that it be sold.

An order for substituted service was made by the Supreme Court on the XX February 20XX.

XX April 20XX - There was a court order for Client C to vacate the property premises to sell.

Client C still refused to move out of the property - this resulted in an enforced order whereby the Sheriff was engaged to remove them from the property.

XX May 20XX - The Sheriff was engaged to escort Client C out of Property A.

XX June 20XX - Client C left the property, and Client B took possession with authority from the court.

Once Client C had vacated the premises it was revealed that the state of the property was disgraceful and could not be sold without considerable preparation.

Client B undertook a substantial clean-up, which included skip bin hire for rubbish removal, Locksmiths to change the locks for added security, Budget Truck rental, Dump Fees, repairs, and renovations to make the house saleable.

Relevant legislative provisions

Income Tax Assessment Act 1997 - Section 118-195

Practical Compliance Guide (PCG) 2019/5