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Edited version of private advice
Authorisation Number: 1052321546521
Date of advice: 22 October 2024
Ruling
Subject: Commissioner's discretion - deceased estate
Question
Is the estate automatically entitled to disregard the capital gain on the disposal of the property pursuant to item 2 column 3(a) of section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes.
The estate is entitled to disregard the capital gain on the disposal of the property pursuant to item 2 column 3(a) of section 118-195 of the ITAA 1997.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ending 30 June 20XX
The scheme commenced on:
DD MM 20YY
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 before 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.
At the time the deceased passed away, they did not have a will.
The spouse of the deceased (Person A) continued to reside at the property.
Letters of Administration appointing the local government organisation (LGO) as administrators of the estate were issued in January 2018.
There were multiple non-legal barriers that contributed to difficulty in LGO obtaining direction from Person A on how the estate should be administered. These barriers included:
• Language barriers.
• There was a lack of family/community support available to Person A.
• A medical incapacity.
On DD MM 20YY a court order was issued appointing LGO full guardianship of Person A (including administration of their financial affairs).
Legal proceedings to obtain vacant possession of the property commenced in 20YY. On DD MM 20YY an order was issued (which included orders varying the distribution of the estate).
Person A vacated the property in MM 20YY and moved into aged care residential accommodation.
A contract for the sale of the property was signed on DD MM 20YY, with settlement occurring on DD MM 20YY.
The absence choice pursuant to section 118-145 ITAA 1997 covers the time from when Person A moved into Aged Care Residential Accommodation until the property was disposed of and settled. The authority was made by LGO on behalf of Person A through the court order.
The property was not used to generate assessable income at any time between the date the deceased passed away until the date the property was sold.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 118-195