Edited version of private advice

Authorisation Number: 1052308127351

Date of advice: 19 September 2024

Ruling

Subject: Deceased estate two year discretion

Question 1

Will the Commissioner exercise the discretion to allow an extension of time for you to dispose of your ownership interest in the dwelling and adjacent land and disregard the capital gain or capital loss you made on the disposal?

Answer 1

Yes.

Having considered your circumstances and the relevant factors the Commissioner will allow an extension of time. However, the extension only applies to the dwelling and the land to the extent that the land was used primarily for private and domestic purposes in association with the dwelling, up to a maximum area of X hectares. This is known as adjacent land.

As such, you can apply the main residence exemption to land of your choice in addition to the land under the dwelling. However, subsection 118-120(3) of the Income Tax Assessment Act 1997 (ITAA 1997) specifies that the total of the land under the dwelling must not exceed 2 hectares.

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:

1 July 20XX

Relevant facts and circumstances

The deceased passed away on XX/XX/20XX.

The deceased owned a property that was acquired after XX September 19XX.

The property was the main residence of the deceased just before they passed away and was not used to produce assessable income at the time of death.

The property was situated on more than X hectares of land.

At the date of the deceased's death, the property was subject to a mortgage to Bank A.

The deceased's will stated that the residue of their estate was to be left to their children, Person A and Person B in equal shares. The will also appointed Person C who had been a friend of the deceased as executor (the executor).

Prior to the deceased's death, the executor had moved into the property in 20XX as they had sold their property and did not have a place to live. The deceased had allowed the executor to live in a vehicle parked on the property and pay rent and power. The relationship between the deceased and the executor deteriorated and the executor ceased paying rent. The deceased was experiencing severe pain and was unable to remove the executor from the property.

On XX/XX/20XX, Probate was granted to the executor.

Neither Person A or Person B was notified by the executor that the executor had received a grant of Probate or a will.

Following the grant of Probate, the executor did not attempt to sell the property, or attempt to appoint a real estate agent to market the property for sale and did not enter an agreement to sell the property.

The executor had one or more associates either living with them at the property at the time or were there frequently.

The executor and their associates stole the deceased's personal items.

Person B was living at the property at the time and was the first to discover that the deceased had passed away and has experienced severe anxiety and sleeplessness since then. An associate of the executor physically assaulted Person B and they could not return to the property following that event. Person B was unable to provide the funds to administer the estate.

The estate did not have capacity to continue making payments to the bank under the loan secured by the mortgage. The estate was at risk of losing the property to the bank due to the executor's failure to dispose of the property.

Sometime after the deceased passed away, Person A spoke with the executor who advised that they were looking after the estate.

Person A was intimidated by the executor and their associates and felt unsafe going to the property. Person A did not have the funds to pursue legal action to administer the estate.

In XX/20XX, the deceased's friend, Person D instructed Person A to consult with Company A regarding the estate and provided Person A with the funds to do so.

Person D had wanted to assist Person A and Person B to administer the estate. However, had not become involved initially due to recently losing many family members and was grieving and planning family funerals.

On XX/XX/20XX, Company A contacted the executor to obtain information about the estate. No response was received.

On XX/XX/20XX, Company A made further contact with the executor and informed them that the bank would be commencing action for possession of the property.

In XX/20XX, Person A consulted Company B to act on their behalf to have Probate revoked and appoint themself as Administrator of the estate. This was undertaken as Person D was dissatisfied with the service being provided by Company A. Person D also provided the funds to Person A to proceed with this.

Person D had attempted to have the executor and their associates removed from the property. However, the executor's associates went to Person D's home, threatened them, and damaged their vehicle.

On XX/XX/20XX, Company B contacted the executor to ask them to agree to the revocation of Probate.

On XX/XX/20XX, the executor contacted Company B stating that they would be releasing themself of their duties as executor.

On XX/XX/20XX, the executor made further contact with Company B, stating that they would advise of the handover of the property in the coming days.

On XX/XX/20XX, the court issued a citation to the executor to provide the grant of Probate.

On XX/XX/20XX, the executor advised Company A that they had vacated the property.

On XX/XX/20XX, the citation was issued to the executor.

On XX/XX/20XX, the bank commenced possession of the property.

In XX/20XX, Person A commenced court proceedings against the executor seeking an order for the revocation of Probate and that Letters of Administration be granted to them.

On XX/XX/20XX, Person A filed a contempt motion.

On XX/XX/20XX, the contempt motion was served on the executor by substituted service, requiring them to appear before the court on XX/XX/20XX.

On XX/XX/20XX, the executor did not appear before the court. The court then ordered them to appear on XX/XX/20XX.

On XX/XX/20XX, the executor appeared in court and provided the grant of Probate to the court. A hearing was scheduled for XX/XX/20XX.

On XX/XX/20XX, the executor did not attend the hearing. The hearing was adjourned by the court until XX/XX/20XX and ordered the executor to file a defence by XX/XX/20XX.

On XX/XX/20XX, the executor failed to appear at the adjourned hearing and did not file a defence.

On XX/XX/20XX, the court informed the executor that if they did not confer with Person A before XX/XX/20XX, Person A would be entitled to enter the matter for trial. No conferral occurred and the executor did not file a defence.

On XX/XX/20XX, the court made an order revoking Probate and that Letters of Administration be granted to Person A.

On XX/XX/20XX, Person A was issued Letters of Administration and commenced administering the estate.

On XX/XX/20XX, Person A organised for the title to be transferred into their name as Administrator. Shortly after, Person A appointed a real estate agent to market the property for sale.

On XX/XX/20XX, Person A entered a contract to sell the property with settlement occurring on XX/XX/20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 118-195(1)

Income Tax Assessment Act 1997 subsection 118-120(3)