Edited version of private advice

Authorisation Number: 1052391403217

Date of advice: 02 May 2025

Ruling

Subject: Deceased estate

Question 1

Will the Commissioner exercise the discretion under section 118-195 of 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 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 ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The deceased passed away on XX/XX/20XX.

The deceased acquired the property prior to 20 September 1985 with their child, Person A as joint tenants.

The property was not the deceased's main residence just before they passed away and was used to produce assessable income at that time.

The property was situated on less than 2 hectares of land.

On XX/XX/20XX, the deceased and Person A changed their ownership of the property to tenants in common.

The deceased had several other children: Person B, Person C, Person D and Person E.

The deceased's will dated XX/XX/20XX appointed Person A and Person F as their executors. The deceased's previous will dated XX/XX/20XX appointed Person E as their sole executor.

Following the deceased's death, some beneficiaries held concerns over the validity of the deceased's 20XX will. They argued that in 20XX, the deceased lacked capacity to prepare a will and did not understand the content of their will.

Under the terms of the deceased's 20XX will, Person A, Person B, Person C, Person D and Person E receive a portion of the deceased's residuary estate (Person C's share held on trust), and a portion divided between the children of each child (Person C's children's share held on trust).

Under the terms of the deceased's 20XX will, Person A receives $XXXX. The balance of the deceased's estate divided equally between their other children.

On XX/XX/20XX, Person A commenced proceedings in the Supreme Court of State A (the Court). Person A sought a grant of probate of the 20XX will. Person E filed a defence and sought a grant of probate of the 20XX will.

Due to the ongoing dispute of the deceased's will, the parties agreed to appoint an independent administrator, Person G from Company A (administrator) to preserve the deceased's assets pending the outcome of the litigation. Prior to this, Person F was administering the estate.

On XX/XX/20XX, Person G was granted letters of administration. This allowed preservation of the estate's assets. However, due to the estate being in administration, the property could not be sold without being in breach of the Court.

Person G administered half of the estate by initially calling in and holding the liquid assets until the Court made further orders.

Following Person G's appointment as administrator, the beneficiaries continued litigation in relation to the deceased's 20XX will and mediation of inheritance claims by some of the beneficiaries. Person G needed to ensure all beneficiaries agreed to any action, including selling the property.

The deceased owned several properties at the date of their death. In 20XX, various beneficiaries expressed an interest in purchasing these properties.

Throughout 20XX, Person G wrote to all the beneficiaries to advise of the intention to sell some of the deceased's properties. It was not until XX/20XX when all parties agreed to the sale of these properties.

in XX/20XX, Person G received valuations from Organisation A for all properties.

In XX/20XX, Person G wrote to Person A to request their intentions regarding the properties that they co-owned with the deceased. Person A advised that they wished to purchase the deceased's interest in the property and an additional property owned solely by the deceased.

Person A expressed that it had always been their intention to either purchase the property from the estate or request the property be appropriated to them as part of their inheritance. Due to the conditions of the wills, Person A needed to rely on the validity of the 20XX will to inherit the property. Person G believed that Person A would oppose them selling the property on the open market.

In XX/20XX, Person A agreed to purchase the property, and an additional property owned solely by the deceased. Person A made an offer to the other beneficiaries. Some of the beneficiaries rejected this offer and advised Person G to not take any action.

In XX/20XX, Person A offered to purchase some of the properties for the valuation price. Some beneficiaries opposed this offer.

In XX/20XX, the parties were still unable to agree to the sale of any of the properties.

Throughout 20XX, developments occurred regarding selling some of the deceased properties which were then sold with settlement occurring in the same year. There is another property remaining unsold.

In XX/20XX, Person G obtained further valuations of the deceased's properties.

On XX/XX/20XX, Person G held mediation with the beneficiaries which was unsuccessful. As the mediation was ongoing, there was still no prospect of Person G being able to sell the property.

In XX/20XX and XX/20XX, Person C's litigation guardian filed applications to the Court seeking directions for Person G to sell the property.

In XX/20XX, Person G obtained a further valuation of the property, for use at a future mediation.

On XX/XX/20XX, Person G held a mediation which was unsuccessful. The Court listed for trial in XX/20XX.

On XX/XX/20XX, the Court instructed Person G to sell the property, however Person A refused to sell the property subject to certain conditions. Following this, Person G applied for a court order to sell the property.

On XX/XX/20XX, the Court pronounced the force and validity of the deceased's 20XX will.

On XX/XX/20XX, Person G obtained a court order authorising the sale of the property and set out the conditions of sale.

On XX/XX/20XX, Person G obtained letters of administration with the 20XX will in solemn form, allowing them to sell the property.

On XX/XX/20XX, Person G sold the property at auction. Settlement occurred on XX/XX/20XX.

From the deceased's death until it was sold, the property was used as a rental property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195