Edited version of private advice

Authorisation Number: 1052376917434

Date of advice: 28 March 2025

Ruling

Subject: Commissioner's discretion - deceased estate

Question 1

Is the occupation fee considered income to the Estate?

Answer 1

Yes.

Under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997), a taxpayer's assessable income includes ordinary income (that is, income according to ordinary concepts) derived directly or indirectly from all sources, during the income year.

As the term 'income' is not explicitly defined in the Australian tax legislation, it takes on its ordinary meaning. Characteristics have been determined through case law to help define the meaning of income according to ordinary concepts. Income that flows from property, including rent, is generally considered income according to ordinary concepts.

The occupation fee is considered to be a periodic payment for the use of an asset and is not a direct reimbursement of expenses, therefore it is ordinary income.

Question 2

Will the Commissioner exercise the discretion under section 118-195 of 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 2

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:

XX XX 20XX

Relevant facts and circumstances

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

The dwelling is located at XX XX XX (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 deceased did not have a will.

There was a dispute over the deceased's estate.

Legal proceedings were commenced, resulting in a Directions Order being made on XX XX 20XX.

Orders were made that Person B and Person C were permitted to remain in occupation of the deceased's premises until completion of the sale of the property, on the condition that Person B would pay an agreed sum per week on account of an occupation fee to the solicitors for the Person D. The occupation fee was to be used for the payment of the building insurance premiums, rates, utilities and taxes in relation to the property. Any excess was not required to be refunded to the Plaintiffs.

The legal proceedings were finalised approximately 2 years after deceased had passed.

A letter of administration was issued on XX XX 20XX.

The property was listed for sale soon after the legal proceedings were finalised. You entered into a contract to sell the property on XX XX 20XX with settlement to take place X weeks later.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 118-195