Edited version of private advice

Authorisation Number: 1052369741162

Date of advice: 19 May 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

No.

Having considered the relevant facts, we will not apply the discretion under subsection 118- 195(1) of the ITAA 1997 to allow an extension to the two-year time limit.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

XX April 19XX

Relevant facts and circumstances

The deceased (the Deceased) passed away on or about XX XX 19XX.

The Deceased acquired the property on XX XX 19XX.

The property is situated on less than two hectares of land.

On XX XX 19XX Bank A provided a summary of accounts addressed to the Deceased issued to the property. The statement period was from X XX to XX XX 19XX.

On XX XX 20XX, Person A (the Deceased's parent) issued correspondence to a solicitor asking how to begin the relevant legal proceedings, costs and power of attorney etc.

On XX XX 20XX, Person A issued correspondence to a solicitor requesting their options regarding the property.

In 20XX, a coronial inquest was conducted into the disappearance of the Deceased.

On XX XX 20XX, a further coronial inquest was conducted into the disappearance of the Deceased.

The coronial inquest states the Deceased had recently purchased a property which they were planning to move into and had not done so.

The death certificate for the Deceased was issued on XX XX 20XX.

On XX XX 20XX, the local council issued a notice of arrears of rates and charges to Legal Firm A.

On XX XX 20XX, Person A passed away.

On XX XX 20XX, Person B was appointed as General Power of Attorney for the Deceased's surviving siblings Person C and Person D (the trustees).

The Deceased passed away intestate.

On XX XX 20XX, an application for the grant of Letters of Administration was filed by Person B.

On XX XX 20XX, Person E of Legal Firm B completed an affidavit stating the home was bare and it appears the Deceased had very little belongings.

On XX XX 20XX, the local council issued a notice of arrears of rates and charges.

On XX XX 20XX, your solicitor contacted multiple law firms to confirm if they had any knowledge of the Deceased or an existing will.

On XX XX 20XX the Supreme Court of XXX made orders granting Letters of Administration to Person B on behalf of the estate on the presumption of death.

On XX XX 20XX you appointed Real Estate Agency A to sell the property.

On XX XX 20XX, your solicitor attended the property with Real Estate Agency A and a locksmith. They discovered unknown persons had entered the property and refused to leave so the locks could be changed.

On XX XX 20XX, your solicitor filed a statement of claim to reclaim possession of the property on behalf of the estate.

On XX XX 20XX, the possession matter was settled by way of consent.

You entered into a contract to sell the property on XX XX 20XX with settlement occurring on XX XX 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-110

Income Tax Assessment Act 1997 section 118-135

Income Tax Assessment Act 1997 section 118-195

Reasons for decision

A capital gain or capital loss may be disregarded where a capital gains tax event happens to a dwelling if you owned it as the trustee or beneficiary of the deceased estate.

For a dwelling acquired by the deceased after 19 September 1985, that was the deceased's main residence and not used to produce assessable income just before their death, you will be entitled to a full exemption if your ownership interest ends within two years of the deceased's death. Your ownership interest ends at the time of settlement of the contract of sale.

In your case, the deceased acquired the property after 19 September 1985. After the deceased passed away, you owned the property as trustee of the estate.

The property sale settled more than two years after the deceased's death. Therefore, you require the Commissioner's discretion to extend the two-year period to be eligible for an exemption.

Practical Compliance Guideline PCG 2019/5 The Commissioner's discretion to extend the two year period to dispose of dwellings acquired from a deceased estate provides guidance on factors we consider when deciding whether to grant the discretion.

Paragraph 3 of PCG 2019/5 provides that we will allow a longer period where the dwelling could not be sold and settled within two years of the deceased's death due to reasons beyond your control that existed for a significant portion of the first two years.

Paragraph 14 of PCG 2019/5 explains we weigh up all of the factors (both favourable and adverse).

Paragraph 17 of PCG 2019/5 provides a list of other factors that may be relevant to the exercise of the Commissioner's discretion which includes the sensitivity of your personal circumstances.

The Deceased purchased the property on XX XX 19XX but disappeared shortly after. When determining whether a property qualifies as a main residence, several factors have been considered. In this case, the coroner confirmed that the Deceased had bought the property with the intention of moving in but had not yet done so.

You have submitted evidence showing that the Deceased's bank statement was addressed to the property. However, the statement covers the period from XX to XX 19XX. This is after the Deceased disappeared and does not indicate that the Deceased had moved into the dwelling.

The solicitor's affidavit on XX XX 20XX stated that there were no photos in the home, or any paperwork and the home was bare, and it appears the Deceased had very little belongings.

The police investigated the disappearance and death of the Deceased, and there were two inquests. The coroner's report states that the Deceased had not moved into the property. Therefore, section 118-195(1) does not apply because the property was not the main residence of the Deceased at the time of their death.

Having considered the relevant facts and evidence, including the significant delays in dealing with the estate, we will not apply the discretion under subsection 118-195(1) of the ITAA 1997 to allow an extension to the two-year time limit.