Edited version of private advice

Authorisation Number: 1052358310255

Date of advice: 5 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 (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 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 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased passed away between DD MM 20YY and DD MM 20YY.

The property is located at XXXX (the property).

The deceased acquired the property after 20 September 1985.

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 property was situated on less than two hectares of land.

The Will of the deceased appointed Person A as executor of the estate.

Grant of Probate was issued to Person A on DD MM 20YY.

The Will provides that the property is to be gifted in equal shares to Person B and Person C.

After receiving no correspondence from Person A regarding the administration of the estate, Person B instructed their solicitor to send correspondence to Person A requesting relevant documents relating to the administration of the estate.

Following repeated attempts to receive the relevant documentation and have the estate administered, an application was filed to remove Person A as executor and an independent administrator of the estate be appointed.

A new Administrator for the estate was appointed by order on DD MM 20YY.

The Administrator began the process of ascertaining the assets and liabilities of the estate. This process included inter alia, contacting all major Australian financial institutions to locate any accounts held by the deceased, undertaking an unclaimed monies search, and submitted a lost superannuation search with the Australian Taxation Office (ATO).

On DD MM 20YY the Administrator notified the ATO of the deceased's death, providing letters of administration and a copy of the will.

In early MM 20YY the Administrator contacted Party A seeking to engage them to attend to the taxation affairs of the estate.

Party A discovered that the deceased had numerous outstanding tax returns. Following this, the transfer of the property was held until the potential tax liabilities of the estate could be established.

In MM 20YY Party A advised the Administrator of the estimated tax position of the estate. As it was apparent that there would be sufficient funds to carry out the contemplated transaction, the parties entered into a Deed of Agreed Distribution, Release and Indemnity dated DD MM 20YY. An application was made to the Court seeking approval to distribute the estate in accordance with the Deed.

On DD MM 20YY the Court made orders approving the Deed.

A transaction was entered into in MM 20YY where Person B paid cash equal to 50% of the agreed market value of the property in order to acquire the 50% share of the property attributable to Person C. The remaining 50% of the property passed to them as a gift per the Will.

The property transaction settled on DD MM 20YY.

The property was not used to generate assessable income between the date the deceased passed away until the date it was sold.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195