Edited version of private advice

Authorisation Number: 1052376585609

Date of advice: 26 March 2025

Ruling

Subject: Commissioner's discretion - 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 X hectares?

Answer 1

Yes.

Having considered your circumstances and the relevant factors the Commissioner will allow an extension of time. However, the extension only extends to the dwelling and the land to the extent that the land was used primarily for private and domestic purposes in association with the dwelling, up to a maximum area of X hectares.

As such, you can apply the main residence exemption to whichever area of land you choose in addition to the land on which your dwelling is situated. However, subsection 118-120(3) of the ITAA 1997 specifies that the total of the land (including the land on which the dwelling is situated) must not exceed X hectares.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased passed away on 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 more than X hectares of land.

The will of the deceased appointed Person A and Person B as executors.

Person A was living with the deceased prior to their passing and continued to live in the property until shortly before the property was sold.

On DD MM 20YY Person B filed an application for a grant of Probate to issue to them. On DD MM 20YY Person A filed a caveat against the grant of Probate.

On DD MM 20YY, Person A filed an application for a grant of Probate to them.

On DD MM 20YY Person B filed a Statement of Claim seeking orders that the caveat lodged by Person A cease to be in force, that Person A be passed over as executor and a grant of Probate be issued to Person B as sole executor - or in the alternative that Probate be issued to Person B and leave reserved to Person A to obtain a grant, as well as orders as to costs.

Following negotiations, on DD MM 20YY orders were made that probate be granted to both Person A and Person B, that Person A was to make payment to the estate in respect of their occupation of the property, provide vacant possession within 28 days, and that the property be listed for sale. Person A failed to comply with these orders and continued to occupy the property.

In/around MM 20YY, Person A and Person B entered into an agreement that the property was to be sold to Person A. This agreement was not documented in writing, but the sale price was found to have been $XX with no fixed settlement date. This agreement became the subject of protracted litigation through to MM 20YY.

Following resolution of the dispute between Person A and Person B on how the property should be disposed of, the property was listed on DD MM 20YY and a contract of sale entered into on DD MM 20YY, with settlement taking place on DD MM 20YY.

The property has not been used to produce assessable income between the date the deceased passed away until the date the property was sold.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195