Edited version of private advice

Authorisation Number: 1052334626418

Date of advice: 21 November 2024

Ruling

Subject: Deceased estate - 2-year discretion

Question 1

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 1

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:

1 July 20XX to 30 June 20XX

The scheme commenced on:

XX XX 20XX

Relevant facts and circumstances

The deceased passed away on XX XX 20XX.

The dwelling is located at XXXXX (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.

The deceased left a Will dated XX XX 20XX that named both of their adult children as beneficiaries and executors.

Letters of Administration for the Will were granted in the Supreme Court on XX XX 20XX to an external administrator.

After the deceased's passing, the property became the main residence of a beneficiary of the will. The property was not rented at any stage.

The contract date for sale was XX XX 20XX with a settlement date of XX XX 20XX. The property was sold by an external administrator of the deceased's estate.

The timeline of events are as follows:

•                     XX XX 20XX - The deceased passed away.

•                     XX XX 20XX - The deceased's two adult children, as named joint executors, commenced communication regarding the sale of the property, with the one expressing their intention to purchase the other's share.

•                     XX XX 20XX - Communication between the executors through their solicitors regarding their roles and the administration of the estate.

•                     XX XX 20XX - Application filed for probate with the Supreme Court, which caused delays in the administration of the estate.

•                     XX XX 20XX - Supreme Court appointed an external Administrator to manage the estate.

•                     XX XX 20XX - The Administrator listed the property for sale with a real estate agent.

•                     XX XX 20XX - After negotiations, a potential buyer withdrew their offer during the due diligence process.

•                     XX XX 20XX - A new contract for the sale of the property was signed with another buyer.

•                     XX XX 20XX - Settlement of the property was effected.

The delay in complying with the 2-year period was due to the fact the estate was subject to legal proceedings and probate was not granted to the executors named in the will, with an administrator being appointed only on XX XX 20XX. This date marks the resolution of circumstances that took more than 12 months from the date of death to resolve.

While the contract for the sale of the dwelling was signed within the 18-month window specified in the safe harbour provisions in Paragraph 11 of PCG 2019/5, the settlement occurred slightly outside of this window. If the initial contract had not been withdrawn by the prospective buyer, the settlement would likely have taken place within the safe harbour timeframe.

The property was listed for sale as soon as was practical after the appointment of the administrator, and the sale process was completed within 12 months from that appointment.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195