Edited version of private advice

Authorisation Number: 1052307204146

Date of advice: 23 September 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 ended DD/MM/20YY

The scheme commenced on:

DD/MM/20YY

Relevant facts and circumstances

The deceased passed away on or about DD/MM/20YY, leaving a will (the will) dated DD/MM/19YY.

The deceased owned a property at XXX (the property), which was their main residence as at date of death. The property has remained vacant since the deceased's passing.

The deceased lived alone and had no children.

As the deceased had been pre-deceased by the named executor in the will, probate was ultimately granted to an organisation to act as trustee (the trustee), pursuant to a Court Order.

The beneficiaries under the will pre-deceased the deceased, effectively resulting in an intestacy.

On DD/MM/20YY, the trustee sent initial correspondence to Person A, a relative of the deceased, and when no response had been received, a follow up letter was sent a few weeks later.

On DD/MM/20YY, the trustee first met with Person A to obtain initial estate information. At that meeting, Person A indicated that the deceased had, prior to death, spoken of going to see a solicitor about their will. The trustee had no record of any meeting with the deceased to discuss a later will.

On DD/MM/20YY, the trustee placed a 'Missing Will' advertisement in the Law Society electronic newsletter seeking any purported testamentary papers of the deceased. No response was received.

On DD/MM/20YY, the trustee first engaged a genealogical services company to develop a family tree and help identify the deceased's potential beneficiaries, which was put on hold shortly after, due to a dispute from Person A.

On DD/MM/20YY, the trustee instructed their solicitors to begin the probate application.

On DD/MM/20YY, the trustee received an email from Person A's then solicitor requesting the administration process to be paused, to allow opportunity to locate a later will.

On DD/MM/20YY, a caveat against probate was lodged on behalf of Person A.

On DD/MM/20YY, the trustee received advice from Person A's newly appointed solicitor, that there was a potential 'testamentary writing', and as such the implication was that the trustee may not be acting in accordance with the latest will.

On DD/MM/20YY, the trustee advised their lawyers, whom they had retained for assistance in the matter of providing opinion on the validity of the purported testamentary writing, that as at that time they were not certain who stood to inherit on intestacy. The trustee stated that the deceased had no children, and had a number of known siblings of whom some had migrated to Australia with him some decades prior and others remained overseas. The trustee stated that they had hired a genealogist to trace the family members, but that this had been put on hold when they had been given notice of the existence of the purported testamentary writing.

A month later, the trustee's lawyers advised that they proposed the trustee take a number of proposed actions, including

•                     take steps to track down known beneficiaries on intestacy

•                     seek evidence of a close and loving relationship between Person A and the deceased, and

•                     place an advertisement calling for any other known testamentary documents of the deceased.

On DD/MM/20YY, the genealogical work recommenced, with the company engaged, estimating that this would take a further several months, and that the issues hindering the resolution of the matter were significant, including the destruction of records during World War II. A draft family tree was provided at this date.

On DD/MM/20YY, the advertisement for a missing will was repeated, also with no response.

On DD/MM/20YY, Letters of Administration Pendente Lite were granted, allowing some administration tasks to proceed whilst the disputes remained ongoing.

During the following months, the beneficiaries under intestacy were identified as relations of the deceased who had survived the deceased. There were ongoing negotiations to attempt to settle Person A's claim and to reach a compromise agreement with the other beneficiaries, most of whom were based overseas, resulting in delays in communication and presenting language barriers that took time to overcome.

On DD/MM/20YY, the trustee, through their lawyers, lodged an application for advice and directions in relation to the testamentary writing.

On DD/MM/20YY, an amended application for probate was lodged on behalf of the trustee, for judicial determination of the beneficiary issue. The Court date was set for DD/MM/20YY and judgement was handed down a few weeks later.

On DD/MM/20YY, the Supreme Court pronounced for the force and validity of the last will and testament of the deceased, being the script signed by them bearing the date DD/MM19YY.

In MM/20YY, the trustee commenced the process to obtain the identification documentation for the now identified residuary beneficiaries.

On DD/MM/20YY, probate was granted to the trustee, enabling the property to be dealt with.

On DD/MM/20YY, the trustee commenced allowing local beneficiaries to access the property and view contents.

By DD/MM/20YY, the trustee had made initial contact to arrange for the property to be placed on the market. The beneficiaries had identified the items they wanted and the trustee arranged for an auction house to view the unwanted contents and provide options to clear the contents.

On DD/MM/20YY, the trustee provided options to the lawyer acting for overseas beneficiaries in respect of chattels.

By DD/MM/20YY, potential real estate agents had been identified and the appraisal process commenced.

By DD/MM/20YY, two real estate agents had been to the property and suggested work be undertaken to bring the long-vacant property to a saleable condition (and one which could be safely inspected by potential purchasers), primarily around clearing the contents from the property and clearing the overgrown garden.

On DD/MM/20YY, appraisals were emailed to beneficiaries for feedback and preferences, and within a week the beneficiary replies had been received and communicated to real estate agent.

On DD/MM/20YY, the property sold at auction.

On DD/MM/20YY settlement occurred.

At all material times, the property was not used for producing assessable income.

The Property is less than 2 hectares in size.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195