Edited version of private advice

Authorisation Number: 1052309596978

Date of advice: 25 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 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:

1 July 20XX

Relevant facts and circumstances

The deceased passed away on DD MM 20YY.

The property is located at XXXX (the property).

The deceased acquired the property after 20 September 1985.

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

The property was situated on less than two hectares of land.

There was a delay in the issue of the death certificate which resulted in probate not being granted until MM 20YY.

The will of the estate named two beneficiaries - Person A and Person B. Person A was named executor of the estate and was residing in the property at the time the deceased passed away.

The will provided that Person A and Person B would inherit the residue of the estate in equal shares.

Person A was dissatisfied with the terms of the will and intimated that they would issue proceedings for greater provision out of the estate.

Person A and Person B agreed that Person A would purchase any portion of the property they would not be entitled to receive as a distribution from the estate.

The net assets of the estate needed to be confirmed before it could be determined the proportion of the property that Person A would be distributed in specie as a beneficiary of the estate as opposed to purchasing.

After the deceased passed away, the estate received a notice of a bequest from the estate of an extended family member of the deceased. The assets inherited by the extended family members estate were transferred into the estate of the deceased in MM 20YY. The assets were sold in MM 20YY, however payment of income owing from the assets was not received into the estate's account until MM 20YY.

Estate tax returns for the 20YY and 20YY financial years were lodged in MM 20YY, however these returns were not accepted until MM 20YY and MM 20YY respectively.

Person A suffered from significant health issues between 20YY and 20YY which interfered with their role as executor and contributed to the delay in dealing with the property.

A Deed of Family Arrangement was signed on DD MM 20YY in which it was agreed that Person A would receive XX% of the property from the estate distribution and would purchase the remaining XX% from the estate. As part of the Deed, Person A agreed not to bring any proceedings in relation to the estate.

The property transfer into Person A's name was finalised on DD MM 20YY.

The property has not been used to generate assessable income at any time between the date the deceased passed away until the time the transfer was finalised.

Person A lived at the property both before and after the deceased's death and intends to continue doing so indefinitely.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195