Edited version of private advice

Authorisation Number: 1052355571952

Date of advice: 11 February 2025

Ruling

Subject: Commissioner's discretion - deceased estate

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 ending DD/MM/20YY

The scheme commenced on:

DD/MM/20YY

Relevant facts and circumstances

On DD/MM/19YY, Person A purchased a property with their spouse (Person B) at XXX (the property)

Person A and Person B lived together at the property until they separated in MM/20YY. Person A continued to live at the property as their main residence until date of death.

On DD/MM/20YY, the Federal Circuit Court of Australia hears Person B's application for a divorce order in relation to their marriage with Person A.

On DD/MM/20YY, the divorce order takes effect.

On DD/MM/20YY, the Family Court of Australia orders that within XX days Person B sign all documents to transfer their interest in the property to Person A.

On DD/MM/20YY, Person A (the deceased) passes away intestate.

On DD/MM/20YY, Person C, one of the deceased's children, is granted Letters of Administration for the deceased's estate.

The beneficiaries of the deceased's estate under intestacy laws are Person C and Person D, the deceased's children.

On DD/MM/20YY, Lawyer A acting for Person C as trustee for the deceased's estate contacted Lawyer B who represented Person B, with a view to finalising the transfer of Person B's share of the property to the deceased, as per the family court orders.

There were X bank mortgages registered over the property. The discharge forms were required to be signed by Person B and Person D, and Person D's spouse, which Lawyer B declined to sign at this time.

On DD/MM/20YY, Person C through their lawyer, proposed a solution to the issue which included the buy-out of Person D's entitlement of the property, and Person D would use funds to discharge the mortgages. This proposal became the basis for a Deed of Agreement.

On DD/MM/20YY, the Deed of Agreement was signed between Person C, Person B and Person D.

In MM/20YY, the relevant forms were forwarded to Person B's lawyers for them to sign and action the transfer of the property to the deceased as sole proprietor, these forms were returned in MM/20YY.

In MM/20YY, the discharge forms were returned.

On DD/MM/20YY, the property transferred from the deceased and Person B as joint proprietors to the deceased as sole proprietor.

On DD/MM/20YY, the property was transferred to Person C as trustee of the deceased's estate.

On DD/MM/20YY, Lawyer A received correspondence from Lawyer C advising they were now acting for Person D.

On DD/MM/20YY, Lawyer A wrote to Lawyer C with an offer to purchase Person D's interest in the property.

Between MM/20YY and MM/20YY, Lawyer A sent a further X emails following up on the offer but received no response.

On DD/MM/20YY, Person D advised they was rejecting the offer.

On DD/MM/20YY, Lawyer A emailed Person D to acknowledge the rejection of Person C's offer, and advised they hoped for a timely resolution.

Between DD/MM/20YY and DD/MM/20YY, a further X emails were sent with no response from Person D or their lawyers.

On DD/MM/20YY, Person D agreed to Person C purchasing their interest in the property, subject to negotiation, and advised they would like an updated valuation of the property being undertaken.

On DD/MM/20YY, Person D advised they intended to instruct a registered valuer to conduct a valuation and sought Person C's agreement to share the cost.

On DD/MM/20YY, Person D was notified that Person C was agreeable to sharing the cost of the valuation.

Between DD/MM/20YY and DD/MM/20YY, Lawyer A sent a further X emails to Person D requesting an update but received no response.

On DD/MM/20YY, Person D emailed Lawyer A to advise they had instructed Lawyer D to act on their behalf.

On DD/MM/20YY, Lawyer A received an email from Lawyer D confirming they held instructions to act for Person D.

On DD/MM/20YY, after receiving correspondence from Lawyer D, the trustee exercised their power of sale and started arrangements to prepare the property for sale.

On DD/MM/20YY, the property was first listed for sale.

On DD/MM/20YY, a contract of sale was signed on the property.

On DD/MM/20YY, settlement occurred.

At all material times, the property was not used for producing assessable income.

The property is less than 2 hectares in size.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195