Edited version of private advice

Authorisation Number: 1052341779453

Date of advice: 12 December 2024

Ruling

Subject: CGT - deceased estates

Question 1

Will the Commissioner exercise the discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 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 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 search 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

On XX XX 19XX, the Deceased and their spouse (Person B) purchased a property (the Property) as joint tenants.

The Deceased resided with Person B at the Property.

After 1985, Person B passed away. The Deceased became the sole owner of the Property.

The Property was always the Deceased's and Person B's main residence. It was never used to produce assessable income.

The Property is less than 2 hectares in size.

On XX XX 20XX, the Deceased engaged legal services of a lawyer (the Executor) to prepare a will (Will X). Will X was filed with the State Police.

On XX XX 20XX, the Deceased revoked Will X and prepared the final will (the Will). The Executor was appointed to administer the Estate under the new Will.

Between XX XX 20XX and XX XX 20XX, the Deceased passed away at home.

The Deceased and Person B did not have children. The Will provided for the Estate to be distributed equally between 2 of the Deceased's family members (Beneficiary A) and (Beneficiary B).

On XX XX 20XX, an autopsy was completed on the Deceased's body.

On XX XX 20XX, the Executor received written correspondence from the State Police, that they did not hold a copy of the original Will.

On XX XX 20XX, the Executor instructed a Law Group (the Lawyer) to act on the Executor's behalf in relation to the Estate.

At this time, the Executor held the Deceased's death certificate and was awaiting receipt of the autopsy report, given the Deceased passed away at home. The Executor had a copy of the Will but was unable to locate the original Will.

On XX XX 20XX, a doctor finalised the autopsy report.

On XX XX 20XX, the Lawyer attempted to engage with the witnesses to the original Will to obtain an affidavit stating that the witnesses recall signing the original Will.

On XX XX 20XX, the Lawyer received the autopsy report and lodged an application in Court for Grant of Probate on behalf of the Executor.

On XX XX 20XX, the Lawyer made a second attempt to engage with the witnesses to the original Will to obtain an affidavit. The Lawyer then arranged a meeting with the witnesses, who stated they would not sign the affidavit without being presented with the original Will.

On XX XX 20XX, the Lawyer prepared an affidavit for the Court, detailing the attempts to seek an affidavit from the witnesses.

On XX XX 20XX, the Executor filed an affidavit detailing steps taken to locate the original Will and progress administration of the Estate.

On XX XX 20XX, The Lawyer served notices on the beneficiaries to the Estate to advise that:

•                     the Deceased had passed away

•                     the original Will has not been located

•                     the Lawyer was instructed by the Executor to obtain Grant of Probate with the copy of the Will.

On XX XX 20XX, the Executor received Grant of Probate. Because the application for Grant of Probate was made with a copy of the Deceased's Will, there were several legalities and complications to obtain the grant. The Lawyer filed the following evidence with the Court to apply for the Grant of Probate:

•                     Evidencing that adequate searches were completed to source the original Will. The Executor made enquiries with all local Solicitors and Banks, who confirmed they did not hold the Will.

•                     Evidence attempts to engage with the witnesses to the Will as to the circumstances surrounding the signing of the original Will. Both witnesses refused to swear an Affidavit.

•                     Demonstrating to the court that the Deceased intended for their Will to be their final testamentary document and to satisfy the Court that the Deceased did not destroy the original Will. The Lawyer lodged a Freedom of Information application with the Police and applied to the State Trustee & Guardian to obtain records on behalf of the Deceased. On XX XX 20XX, the Lawyer received approval to release the Deceased's information. State Police required the Court's approval before they could release the information to the Lawyer.

•                     Requirement to prove to the Court who would be entitled to benefit from the Deceased's Estate under the rules of intestacy if the Will was not upheld. Beneficiary A would have been entitled to the entirety of the Estate should this occur.

•                     The Lawyer served notices to Beneficiary A and Beneficiary B as the named beneficiaries as their interests in the Estate would be affected by the Court's decision.

•                     The Executor filed an affidavit advising the Court that they would lodge the original Will in the event it was located.

On XX XX 20XX, the Lawyer received instructions from the beneficiaries, requesting the Property be transferred to them; rather than have the Estate sell the Property. The Lawyer posted the relevant forms to the beneficiaries to allow the transfer to occur.

On XX XX 20XX, after various follow up attempts, the Lawyer received a letter from a solicitor, on behalf of the beneficiaries advising that the beneficiaries to the Estate were deliberating the potential capital gains tax (CGT) implications for the Property. The beneficiaries were unable to provide final instructions as to whether the Estate should sell the Property; or transfer as per previous instructions. The letter noted that the Property was still registered in the joint names of the Deceased and Person B. They requested that the Notice of Death and transmission application be lodged, with all Strata levies paid.

The Lawyer engaged an accountant at the request of the Executor, to provide CGT advice to the beneficiaries.

The Property required significant works to be completed before it could be sold. This included electrical work, tiling, painting, lighting, kitchen refurbishments, gardening, cleaning, and major repairs. The beneficiaries attended to several of the repairs and maintenance.

COVID-19 caused delays in preparing the Property for sale.

On XX XX 20XX, the Property title was transferred to the Executor, in their capacity as Executor of the Estate.

On XX XX 20XX, the Lawyer received advice from the solicitor representing the beneficiaries, advising that the Estate should proceed with listing the Property for sale.

On XX XX 20XX, the Executor engaged the Lawyer to prepare a Contract of Sale.

On XX XX 20XX, the Executor engaged a real estate agent to list the Property for sale.

On XX XX 20XX, the Property was sold at auction.

On XX XX 20XX, the Property settled.

On XX XX 20XX, the Executor received a letter from the State Trustee confirming that they had located the Deceased's original Will.

The Executor filed the original Will with the Court to process an updated Grant of Probate.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195