Edited version of private advice

Authorisation Number: 1052404867950

Date of advice: 5 June 2025

Ruling

Subject: CGT - deceased estate

Question

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 to dispose of the ownership interest in the property and disregard the capital gain made on the disposal?

Answer

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:

1 July 20XX

Relevant facts and circumstances

The deceased passed away several years ago.

The deceased lived at the property up until they went into an aged care facility.

The trustees of the deceased estate are electing to continue to treat the property as the deceased's main residence under the Absence Rule from the date they went into the facility until they passed away.

The property is less than 2 hectares in size.

The property was never used to produce assessable income either before the deceased passed away or after.

The Will of the deceased provided to their adult child (Individual 1), a right to reside in the Property until Individual 1's death or they permanently vacated the property.

A Grant of Probate was issued to one of the executors named in the Will of the Deceased.

The only assets of the estate were the main residence and a bank account.

A few years after the date of death, the executor filed an originating motion with the Court seeking orders to be discharged as executor and trustee of the estate as they were retiring.

By orders of the Supreme Court, the Administrators (Y and Z) were appointed as trustees of the estate of the Deceased.

Individual 1 had lived in the property with the deceased since they were born.

The Administrators required that Individual 1 move out of the property to pay the estate debts.

The original trustee had not sought to immediately recover their costs as they were aware that doing so would require the property to be sold.

The original trustee also felt an obligation to honour the wishes of the deceased as set out in their Will (that is, to give Individual 1 a home to live in).

The original trustee was also concerned for Individual 1's welfare.

Rather than attempting to have Individual 1 vacate the property to sell it, it was the original trustee's preference to have the estate liabilities paid by Individual 1 or the other beneficiaries of the estate to alleviate the need to sell the property to pay the debts. The original trustee also considered mortgaging the property to pay the estate's liabilities. None of the alternatives to have the estate's liabilities paid eventuated which necessitated the sale of the property despite Individual A's right to reside contained in the Will.

Numerous requests were made to Individual 1 asking them to move out so the property could be sold, and Individual 1 refused to do so.

An application, seeking to have Individual 1 removed from the Property, was filed with the Court.

The Court made Orders for the recovery of the property.

The Administrators took possession of the property when Individual 1 was removed from the property by the Sheriff's Office.

The property was then prepared for sale and was placed on the market.

The property was sold in the month after it was placed on the market.

Settlement was completed a few months after it was sold.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 118-195