Private ruling: Capital gains tax (CGT) - deceased estate - two year extension
Date of advice: 10 May 2019
Published: June 2019
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Will the Commissioner allow an extension of time under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to 20XX for you to dispose of your ownership interest in the dwelling and disregard the capital gain you make on the disposal? | A1: Yes. Having considered your circumstances and the relevant factors, the Commissioner will allow an extension of time. Further information about this discretion can be found by searching 'QC 52250' on ato.gov.au

Relevant facts and circumstances: The deceased individual (the deceased), acquired a residential property (the property) before 20 September 1985 jointly with their spouse and eldest child, whereby the deceased and their spouse each held a x% share of the property as joint tenants, and the eldest child (child 1) held the remaining % as a tenant in common. The deceased’s spouse passed away shortly following 20 September 1985, and the deceased acquired their x% ownership of the property. Also at that time, child 1 sold their y% ownership of the property to their youngest child (child 2). Thereafter, both the deceased and child 2 each held an ownership interest of the property. The property was occupied by the deceased and their family as the family home, and their sole main residence until their death. Child 2 also lived in the property as their main residence together with the deceased up until their death, and then until the eventual sale of the property. The land on which the property is situated is less than two hectares in size. There was a capital gain made upon the sale of the property. A contract of sale for the property was entered into by child 2 and child 3 as executor for the estate of the deceased in mid-2017, with settlement occurring nearly five years after the death of the deceased. The property was not used to produce income at any time by either the deceased, child 2 or child 3 as executor. At the time of the deceased’s death, they were residing temporarily in a nursing home as part of their rehabilitation following an injury sustained in an accident and a brief hospital stay. Circumstances surrounding the delay to the sale of the property The cause of the delay in disposing of the property immediately following the death of the deceased was an inability for the child 3 acting as the executor to obtain co-operation from child 2, whom had been diagnosed with an illness previous to the deceased death. As a result of the deceased passing away in a nursing home, a Coroner’s report was required, and the death certificate was not able to be issued until the Coroner’s report was finalised, which did not occur for a considerable time. The main cause of the delay in the completion of the Coroner’s report was due to the deceased’s injury having been sustained in an accident which occurred on private property. A police report was provided to the Coroner including witness statements and other relevant information. The Coroner eventually decided not to investigate further and ended the investigation without an inquest. The death certificate was sent to child 2 as the next of kin; however child 2’s illness made it difficult to obtain a copy of the certificate or discuss matters in relation to the property. Child 3 attempted to obtain a copy of the death certificate from the relevant authorities, however this was delayed due to not having any photo identification, and child 2 also refused to assist. Due to this child 3 had to obtain photo identification which was not an easy process, as they migrated to Australia under a child passport, and as such they had not had any form of passport for many years. Their birth certificate also required translation. As stated above, child 2 was diagnosed with an illness and was undertaking treatment for this from the date they were diagnosed. However, in the belief that they were recovering they stopped undertaking the treatment, and due to this, at the time of the deceased’s death the condition was prominent. Following the deceased’s death, it was child 3’s desire and intention to dispose of the property as soon as probate could be issued. However, following the deceased’s death child 2 became a recluse and largely refused family contact. Child 3, being Child 2’s only immediate family member, had no way of contacting child 2 on a regular basis. Child 3 made contact with relevant health services for assistance, however this only lead to child 2 further refusing contact with child 3. The family viewed the circumstances that caused the delay in the sale of the property as being a result of child 2’s illness, exacerbated by her unwillingness to pursue prescribed treatment. Child 2 ultimately reached out to family members when their financial means were exhausted early in 2017. At that time, following legal advice, child 2 agreed to resign as executor and to support the sale of the property. This left child 3 as the sole executor from this point in time. Probate was subsequently obtained in mid-2017, with the property being promptly placed on the market and sold under a contract a few weeks later, with settlement taking place a few months following this.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 118-195