Edited version of private advice

Authorisation Number: 1052357137461

Date of advice: 5 February 2025

Ruling

Subject: CGT - deceased estate

Question 1

Will the Commissioner exercise the discretion under the Income Tax Assessment Act 1997 (ITAA 1997) section 118-195 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 of the property up to 2 hectares?

Answer 1

Yes. The Commissioner will apply the discretion allow an extension to the two-year time limit. However, the maximum area of land that is covered by the main residence exemption (including the area under the dwelling) must not exceed 2 hectares. You can choose which two hectares are exempt. Any capital gain made on the remainder on the property is subject to capital gains tax.

This ruling applies for the following period:

Year ending 20XX.

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

Person A and their spouse purchased Property A (the property), which was XX acres of vacant land in 19XX.

A dwelling was built on the land in XXX 19XX and was used throughout Person A's ownership for main residence purposes, the land was over 2 hectares.

In 20XX, the owners received notification that the property was going to be acquired under a Public Acquisition Overlay (PAO) by Entity A as part of a development. The acquisition was slated to occur in 20XX.

The PAO meant that no alterations could be made to the property and putting it up for sale would require approval from Entity A.

In 20XX, as part of Person A's divorce settlement they acquired their spouse's ownership share in the property and became sole title owner of the property.

In 20XX, Person A received notification from Entity A that the acquisition would nor not occur until 20XX and they would only be acquiring X acres of the total property. The remaining X acres would remain with the landowner. However, this section of the property had no road access, and no amenities connected to it. The land had become worthless.

Person A (the deceased) passed away on XX XXX 20XX.

The deceased appointed their sibling Person B as executor and trustee of the estate. Their 2 children were appointed beneficiaries of the estate.

Between the time of the deceased's passing and XX XXX 20XX, the executor had made enquiries with Entity A towards leasing the property.

On XX XXX 20XX, probate was granted.

On XX XXX 20XX, the executor sent a letter to 5 different state members of parliament and the Ombudsmen outlining the following:

•                     The PAO had ruined the deceased's financial retirement plan and planned inheritance for their family.

•                     The deceased could not sell or alter the property and the significant burden it created contributed to their death.

•                     The executor had received advice from several real estate agents that the property was not saleable due to the PAO.

•                     The executor was seeking government assistance in resolving the issue to administer the estate and provide the funds from the property sale to support the deceased's family.

On XX XXX 20XX, at the recommendation of the Ombudsmen, the executor lodged a complaint with the state government Department of XX seeking an early acquisition of the property.

On XX XXX 20XX, the executor forwarded the letters from XX XXX 20XX and XX XXX 20XX to the then state Minister for XX, the Honourable Person C MP, seeking assistance.

On XX XXX 20XX, an Exclusive Sale Authority was signed with a real estate agency to represent and sell the property.

On XX XXX 20XX, the director of the real estate agency wrote to the executor to advise that they have been unsuccessful selling the property due to the PAO it was under.

The executor made a hardship application to Entity A immediately after this, seeking early acquisition of the property. Entity A approved the application, and a contract of sale was signed on XX XXX 20XX.

Relevant legislative provisions

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

Further issues for you to consider

We have limited our private ruling to the questions raised in your application. There may be related issues that you should consider, including:

Subsection 118-120(3) of the ITAA 1997 specifies the maximum area of land (including that land under the dwelling) covered by the main residence exemption is 2 hectares.

You can choose which area of land to apply the main residence exemption to. The remainder of the property, outside of these 2 hectares, will be subject to capital gains tax.

For further information on how to calculate any capital gain you make on the remainer of the property, refer to Taxation Determination TD 1999/67.