Edited version of private advice

Authorisation Number: 1052342445343

Date of advice: 12 December 2024

Ruling

Subject: Deceased estate two 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:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased passed away on XX/XX/20XX.

The deceased acquired the property after XX September 19XX and the property is less than X hectares in size.

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 deceased's children, Person A and Person B were appointed as joint executors under the deceased's will.

In 20XX, Person A began suffering from severe health issues.

In 20XX, Person A health continued to deteriorate.

Person A claimed that the deceased had verbally advised that they wanted them to purchase the property. Person B disputed this claim.

On XX/XX/20XX, probate was granted.

In 20XX and 20XX, discussions were held between the beneficiaries regarding the purchase price of the property. The dispute remained unresolved with an agreed price for Person A to purchase the property not achieved. Person A's health continued to deteriorate with multiple complications and issues. Person A was again hospitalised with a life expectancy of a certain period.

In XX/20XX, following Person A's discharge from hospital, they moved into the property. It was agreed that they could occupy the property whilst they were unwell and undergoing treatment.

After Person A had moved into the property, they then refused to vacate.

The beneficiaries of the will entered discussions with Person A in an attempt to remove them from the property which were unsuccessful. Solicitors were then engaged.

In 20XX, Person B's solicitor contacted both Person A and Person A's solicitor to attempt to remove her from the property. Many conversations were held and correspondences issued and received between the beneficiaries and solicitors.

It was not possible to remove Person A from the property without taking them to court. Person B was mindful of Person A's condition and that they had a limited lifespan, therefore Person B did not wish to pursue court proceedings to obtain an eviction order.

In XX/20XX, Person A experienced further health issues which restricted their mobility. Person A then commenced medical treatment in a nearby town. As Person A no longer had a support network in their previous place of residence, returning there was not possible.

In XX/20XX, Person A developed Covid.

In XX/20XX, Person A was hospitalised and placed into palliative care.

On XX/XX/20XX, Person A passed away.

In late XX/20XX, following Person A's death, Person B obtained access to the property entering via a window. Person B then arranged for a locksmith to change the locks as they did not have a key to the property.

Person B and another beneficiary commenced some minor maintenance on the property to prepare it for sale, which included washing and cleaning internal walls floors and windows, cleaning exterior areas of the property, repairing plaster cracks, repairing a hole in the wall, replacing light globes, tidying the garden, and fumigating the house and removing rubbish.

On XX/XX/20XX, an appointment was made to appraise the property. The property was then listed for sale on XX/XX/20XX.

A contract to sell the property was entered on XX/XX/20XX with settlement occurring on XX/XX/20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 118-195(1)