Edited version of private advice

Authorisation Number: 1052272748624

Date of advice: 11 July 2024

Ruling

Subject:CGT - deceased estate - 2-year discretion

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 of the property?

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 XXXX

The scheme commenced on:

1 July XXXX

Relevant facts and circumstances

XX XX (the deceased), passed away on XX XX 20XX.

At the time of their death, the deceased held a three-quarter interest in the property at XX XX, XX, XX. The remaining one-quarter interest being held by the deceased's XX, XX XX (XX) and their de facto partner, XX XX (XX).

The property was held at tenants in common between the deceased, XX and XX.

The deceased moved to residential care in XX 20XX.

The property was the deceased's main residence and was not used for income producing purposes throughout their whole ownership period.

The property is less than 2 hectares.

The deceased's will appoints their XX XX, and their XX XX XX, as executors of the estate.

XX and XX remained living at the property with their children until XX 20XX when they separated, and XX moved out of the property with 1 of their children.

XX mental health deteriorated in 20XX, exacerbated by the separation from XX and their parent's death, further XX ceased work in XX 20XX.

The relationship between XX and XX was conflictual and complicated by child custody disputes and interim protection orders.

In XX 20XX, XX was medically diagnosed with XX and XX, noting this impaired functioning and difficulty maintaining a routine or completing tasks.

On XX XX 20XX, the XX of XX XX, XX XX (XX XX), was granted Power of Attorney of their parent.

On XX XX 20XX, XX XX moved to residential care.

During 20XX, discussions were held between XX and the deceased's family regarding providing a loan from the family to XX to enable the purchase of XX share of the property. The property had a substantial mortgage and was beyond the financial means of XX.

In XX 20XX, XX determined that selling the property was the best way forward.

In XX 20XX, Family Court proceedings commenced between XX and XX following the breakdown of their relationship. These proceedings continued without resolution.

On XX XX 20XX, XX XX received written advice from XX lawyer, XX XX. They will cease acting in XX capacity as executor of their mother's estate due to conflict of interest with the family law proceedings. Further requesting XX XX on behalf of their parent, seek independent legal advice in relation to applying for probate as "proving executor" and XX to be noted "as executor with leave reserved".

On XX XX 20XX, probate application was lodged.

On XX XX 20XX, a Grant of Letters of Administration was issued appointing XX XX as Administrator of their grandparent's estate.

On XX XX 20XX, the Family Court of Australia, made a court order for XX to file an application to order the sale of the property and adjournment of a hearing regarding custody of the children.

On XX XX 20XX, XX solicitor advised that XX had not made the application.

On XX XX 20XX, XX made an application for XX to be removed from the property and XX and the children reside at the property.

On the XX XX 20XX, a hearing was scheduled but was adjourned to XX XX 20XX.

On XX XX 20XX, the Family Court of Australia, made a court order, appointing XX and XX XX as trustees for the sale of the property and to attend to the preparation and sale of the property. An application to have XX removed from the property was unsuccessful.

On XX XX 20XX, XX XX removed themselves as trustee of the property and did not take any actions in relation to their trusteeship.

On XX XX 20XX, the Family Court of Australia, made a court order, appointing XX as sole Trustee of the property. XX was to attend to the preparation and sale of the property. XX was ordered to vacate the property.

XX subsequently moved out of the property and XX and the children resided at the property.

In XX 20XX, painting commenced of the inside and outside of the property.

On XX XX 20XX, a 2-month adjournment request was submitted by XX to the Supreme court to allow time for sale of the property.

On XX XX 20XX, the property was subject to a possession hearing as the mortgage was in arrears of about $XXXX. The mortgagor wanted the debt paid in full of $XXXX effective of the day before the possession hearing.

On XX XX 20XX, civil proceedings were brought by the mortgagor and an order for possession was made on the property.

In early XX 20XX, XX advised a real estate agent was engaged to sell the property.

On XX XX 20XX, a court order was made regarding the disbursement of funds from the sale of property.

On XX XX 20XX XX passed away.

The property was sold at auction on XX XX 20XX and settlement occurred on XX XX 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195