Edited version of private advice

Authorisation Number: 1052337263962

Date of advice: 28 November 2024

Ruling

Subject: Commissioner's discretion - deceased estate

Question 1

Will the Commissioner exercise his discretion in subsection 152-80(3) of the Income Tax Assessment Act 1997 (ITAA 1997) to extend the 2 year time limit to enable the small business capital gains tax (CGT) concessions in Division 152 of ITAA 1997 to be applied in relation to the sale of the property?

Answer 1

Yes.

Having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time as there is evidence of an acceptable explanation for the period of extension requested, and it would be fair and equitable in the circumstances to provide the extension.

This ruling applies for the following period:

Year ended XX June 20XX

The scheme commenced on:

XX July 20XX

Relevant facts and circumstances

The Deceased died unexpectedly during the 20XX-XX financial year.

The death certificate was issued on in the 20XX-XX financial year.

The cause of the delay in the death certificate being issued was because the final autopsy report was not issued until the 20XX-XX financial year.

The Deceased was under XX years of age at the time of their death and was divorced, with children.

At the time of their death, they had a de facto partner (Partner), with whom they had lived with several years.

The Property, which was owned by the Deceased, was comprised of multiple lots.

The lots were acquired in different years.

During the 20XX-XX financial year, at auction, the trustee of the estate, entered into a contract to sell the Property. One of the children was the executor. The sale included certain structural improvements including a dwelling, but did not include livestock, grain and fodder in storage and depreciating assets.

The contract settled in the 20XX-XX financial year.

The Property sold for a particular amount. The proceeds were used to pay a financial institution loan and other costs of sale, including sales commission and legal fees.

The Property was not disposed of within X years of the Deceased passing.

There were numerous extenuating circumstances that delayed the administration.

At the time of death, the Deceased's family members and their legal advisors were unsure of the existence of a Will. A significant amount of time and effort was expended in researching if a Will existed and if it was held by a legal firm. Immediately after the Deceased passed away, communication was held between family members and the lawyers administering the estate of the Deceased. Blanket email communication with local legal firms were issued to locate potential prepares of a Will for the Deceased. This came back negative.

Due to no Will being located, it was decided to apply for Grant of Letters of Administration. The Letters of Administration were issued by the Registrar on during the 20XX-XX financial year.

A notice of claim was lodged by the lawyers acting for the Partner during the 20XX-XX financial year against the estate. This was to initiate a claim against the estate. The noticed informed that no distribution of the estate must take place unless their client's claim is recognised and resolved either to their satisfaction or in accordance with an Order of the Supreme Court of the state in question. This claim was successful and it was understood that the Partner would participate in the distribution of the assets of the estate.

There was a significant delay in the preparation of the Deceased's autopsy. Until that report was issued in the 20XX-XX financial year, it was not possible for the death certificate to be issued, being on a particular date in the 20XX-XX financial year. Once this was issued the final plans for the Property to be auctioned and the auction occurred in the 20XX-XX financial year.

At the time of death there was a mortgage over the property and it took a significant amount of time for the Public Trustee to have the mortgage released, with correspondence being received in the 20XX-XX financial year advising of the release.

The Deceased's superannuation was unable to be accessed as the death certificate did not state a cause of death, until the finalisation of the autopsy result. This allowed the Registrar of Births, Death and Marriages to issue the final death certificate stating a cause of death in the 20XX-XX financial year.

At the time of death, not all livestock on the Property were owned by the Deceased. It was necessary to undertake a full herd inspection for the purpose of identifying which livestock were owned by the Deceased and which livestock were owned by other parties.

The Partner was living in the dwelling on the Property at the time of death. To vacate the Partner, it was necessary to provide them with sufficient financial resources to relocate. These resources were not available until the sale of livestock were undertaken and the clearance sale of depreciating assets took place in the 20XX-XX financial year. Interim distributions of cash were made to the Partner which enabled them to vacate the property in the 20XX-XX financial year, with the auction then held in the same financial year.

The sale of the Property resulted in a CGT event.

The Deceased was entitled to apply some of the small business CGT concessions, such as the small business XX% reduction and CGT retirement exemption.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 152-80(3)