Edited version of private advice

Authorisation Number: 1052345664855

Date of advice: 17 January 2025

Ruling

Subject: Capital gains tax

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 to dispose of the ownership interest in the Property and disregard the capital gain 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 ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased passed away several years ago.

The deceased lived in the property as their main residence just before they passed away.

The deceased acquired the property prior to 20 September 1985.

The property was less than X hectares in size.

The property was never used to produce assessable income before or after the deceased died.

The deceased's spouse passed away several months after the deceased.

The deceased left all of their estate to their spouse.

The deceased's spouse lived in the property as their main residence until they passed away.

The deceased's spouse had a right to reside in the property.

The executors of both the deceased estate and their spouse's estate are children of the deceased and their spouse.

There are multiple sibling beneficiaries.

The executors met with lawyer Company Z to apply for probate of their parents' wills.

The executor was working fulltime and lived in a different state and that was the first opportunity to travel.

A cost agreement was signed X months after engaging the lawyers, but the applications were not filed for X months.

Probate for the decease's spouse was granted approximately X year after engaging the lawyers and at the same time the executor was informed that they had to re-apply for letters of administration for the estate of the deceased.

Unforeseen and lengthy delays in granting probate/letters of administration resulted in one of the beneficiaries started making demands and threats.

The estate retained Solicitor Z of Company Z for advice on how to handle the situation and how could some of the beneficiaries buy out the other beneficiaries in a property when one objected. It was suggested a deed of family agreement be drafted and sent out to be signed.

After a request for this to happen including an executor seeing Solicitor Z in their office, it was finally sent for consideration. The amended deed was sent to Company Z in X month.

Further attempts to arrange a meeting in order to go through the deed and send out amounted to nothing. There was no response received or contact from Solicitor Z. These delays left the estate about months behind and having seek further legal advice on how to proceed forward.

There was an irreconcilable family breakdown with one sibling necessitated all communications had to be directed through lawyers.

During the process of preparing the property for sale the executor's siblings expressed an interest in purchasing the property via an 'In Species Transfer'.

A qualified valuation was obtained which the estate based the sale price on.

Before the transaction could proceed, the estate needed to sell another property so the deal could be financed.

COVID delayed the auction of the property and finally being auctioned with an extended settlement, but the vendor defaulted on that date finalising settlement a few months later.

This left the property in limbo until then when the estate thought the In Species Transfer would go ahead.

A family agreement needed to be sent to the estranged sibling and Company Z were asked to prepare and send.

Nothing happened many emails and phone calls went unanswered and visits to the office to no avail.

The executor complained to the State Legal Services on the following basis:

•                     the practitioner caused a delay in your matter; and

•                     the practitioner would not respond to your correspondence

The State Legal Service did not return a finding until the following year. The State Legal Services investigation discovered the legal practitioner could have handled the matter in more timely manner.

You then approached Company Y,(a new lawyer) and briefed them to send out the family agreement.

The estranged sibling did not allow the 'In Species Transfer' to go through.

The property was put on the market and sold X months after the new lawyer was engaged and settled X months after the sale.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195