Edited version of private advice

Authorisation Number: 1052363351717

Date of advice: 18 February 2025

Ruling

Subject: Commissioner's discretion - deceased estate

Question

Will the Commissioner exercise his discretion under section118-195 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

Yes.

When the title of the property was transferred, this still allowed the parent to reside at the property throughout their lifetime. Upon their death, the property transferred to the deceased which caused significant delays in selling the property.

Taking into consideration the complexities of administering both deceased estates and the property was sold as soon as practicable after the issues were resolved.

The Commissioner will apply the discretion to allow an extension to the two-year time limit under section 118-195 of the Income Tax Assessment Act 1997.

This ruling applies for the following period:

Year ending 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

On XX XXX 19XX Person A acquired property A (the property) from their ex-spouse.

The property is less than 2 hectares in size and was used for main residence purposes.

On XX XXX 20XX, Person A had the title for the property updated to reflect a change of surname.

Around 20XX, Person A's child Person B commenced residing at the property with Person A.

On XX XXX 20XX, Person A's last Will details the following:

•                     Appointed Person B as executor and trustee of their estate.

•                     Should Person B not survive Person A, they appoint Person C as executor and trustee.

•                     Leaves the entirety of their estate upon trust to Person B providing they survive Person A.

•                     Should Person B not survive Person A, the estate is to be divided among their living great grandchildren.

On XX XXX 20XX, Person A transfers the title of the property to the following:

•                     Person A of a life estate and,

•                     Person B of an estate in remainder, contingent.

On XX XXX 20XX, Person A updated the title of the property to include their middle name.

Between XX XXX and XX XXX 20XX, Person B passes away intestate. The family was of the understanding Person B had no assets and did not apply for probate.

On XX XXX 20XX, Person A passed away.

In early 20XX, Person C as the nominated executor of Person A's estate, applies for probate of the estate.

In XXX 20XX, Person C's lawyer conducts a title search of the property advising the property title had been transferred to Person B in 20XX.

In XXX 20XX, due to title change of the property, Person C applies for Letters of Administration for Person B's estate.

On XX XXX 20XX, Person C makes an affidavit, which is an inventory of Person A's estate, describing the property as "Beneficial interest on the estate of the late Person B, which owns the property.

On XX XXX 20XX, probate is granted to Person C for Person A's estate.

Between XXX 20XX and XXX 20XX, the Court made several requisitions in relation to administration of Person B's estate with the following issues to be resolved:

•                     Person B's relationship with Person D and their potential entitlement to the estate.

•                     Provision claims were made for entitlement to proceeds of the estate.

•                     Grant of probate requests for Person B's estate.

•                     Grant of proceeds of Person B's estate to be transferred to Person A's estate.

•                     Proceed distributions of the property sale and payment of the estates administration expenses.

On XX XXX 20XX, a Deed of Arrangement is made between Person C, Person E, Person D, and the great grandchildren who are the nominated beneficiaries of Person A's estate. This Deed acknowledges and agrees on several points:

•                     Person B's spouse could be granted by the Courts their entire estate under section 111 of the Succession Act 2006 (ACT).

•                     Person C and Person E contended, when the title for the property was transferred in XXX 20XX, Person A may have been suffering from a medical condition and may not have understood the effect of this transfer.

•                     Instead of making counter claims against Peron B's estate all parties agreed to administer both estates to avoid further unnecessary expenses and delaying administration of the estates.

•                     All parties agreed Person C would be granted administration of Person B's estate and will subsequently sell the property.

•                     All parties agreed, Person B's estate is to be divided into the specified equal shares with Person D to receive one share and the remaining specified shares to be transferred to Person A's estate.

•                     From Person A's estate an amount of money would be transferred to Person E, and then after all the estate expenses are paid the residual of the estate will be divided equally between the great grandchildren.

On XX XXX 20XX, Letters of Administration were granted to Person C for the estate of Person B.

On XX XXX 20XX, contract was entered for sale of the property at auction.

On XX XXX 20XX settlement on the property is finalised.

Relevant legislative provisions

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