Private ruling: Commissioner's discretion - deceased estate
Date of advice: 14 August 2024
Published: 23 September 2024
Ruling period: Year ended DD MM YY
Date scheme commenced: DD MM YY

Ruling: Q1: 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 for you to dispose of your ownership interest in the dwelling (subject to the 2 hectare limitation) and disregard the capital gain or capital loss you made on the disposal? | A1: Yes. The Commissioner will apply their discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the two year time limit. However, the maximum area of land that is covered by the main residence exemption (including the area under the dwelling) must not exceed 2 hectares. You can choose which two hectares are exempt. Any capital gain made on the remainder on the property is subject to capital gains tax.

Relevant facts and circumstances: The deceased passed away on DD MM YY. The dwelling is located in Australia. The deceased acquired the property before 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 two hectares of land. The executor of the estate lived a suburb some distance from the deceased's residence. Between the date the deceased passed away and the date the property was sold, the state was placed into multiply state lockdowns due to COVID-19. This delayed the executor obtaining probate and caused further issues accessing the property and preparing the property for sale due to the lockdown measures. Probate was granted on DD MM YY. On the DD MM YY, the first police report documented forced entry to the property and damages conducted to the property. Due to the first break in where the fences were stolen this created further safety concerns and further works were required to rectify the issue. On the DD MM YY, a real estate agent was appointed to sell the property. On the On DD MM YY, the property was finally advertised for sale after the first round of damages to the property were rectified. On the On DD MM YY, the second police report further documented forced entry to the dwelling, and damages conducted to the property. The property market for the area had almost come to a standstill and only X unacceptable verbal offers were received that were not in writing. In MM YY, a second real estate was appointed to sell property further unacceptable offers were received that were either verbal offers or paying a deposit and the final balance in several years with access to the property in the interim. On the DD MM YY, the third police report documented further damage to the property. The property was subsequently contracted for sale on DD MM YY, with settlement occurring on DD MM YY.

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