Private ruling: Capital gains tax- deceased estate
Date of advice: 6 June 2018
Published: August 2018
Ruling period: Year ending 30 June 2018
Date scheme commenced: 01 July 2017

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and extend the two year period? | A1: Yes Having considered your circumstances and the relevant factors, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time. Further information on the relevant factors and inheriting a dwelling generally can be found on our website ato.gov.au.

Relevant facts and circumstances: The deceased passed away. The dwelling was the deceased’s main residence and was not incoming producing. The deceased left a Will appointing executors. The property was acquired by the deceased post 20 September 1985. At the time of the deceased’s death, an executor and beneficiary was residing at the property and had resided at the property throughout different periods of time with the deceased. The executor and beneficiary continued to reside at the property. They did not pay rent but did pay the rates, water and insurance. The property remained vacant from this time until settlement. The property was subject to a mortgage to a bank as the deceased was a guarantor to a relative. The executors have been in dispute and have been unable to administer the Estate. One executor gave notice of a claim against the estate which had to be resolved, culminating in the Supreme Court removing the executors and appointing an independent administration. Following the deceased’s death, the executors, engaged lawyers to assist in the administration of the estate. The executors met and one expressed their interest in purchasing the property from the other beneficiaries, subject to the bank’s mortgage. The lawyers prepared the necessary documentation and distributed to the executors. One returned the signed form. Another’s signed form was never received even though the lawyers chased same. This ultimately resulted in litigation in the Supreme Court. One executor commenced family provision proceedings against the estate. This was discontinued. The other returned the signed documentation and the property was transmitted into the names of the personal representatives of the estate. One beneficiary/executor offered again to buy the property in exchange for an amount being paid to each of the beneficiaries. This offer was not accepted. One beneficiary made another offer to buy the property but then would not sign the transfer documents. Another person offered to buy the property. This offer was accepted by one executor but the lawyers were unable to obtain instructions from the other. One executor engaged lawyers to advise if the other should be removed as co-executor. They wrote to the executor but they never responded. A further letter was sent from one executor lawyers to the others, no response was received. An application was made to the Supreme Court for the appointment of one executor as an administration. An administrator of the estate was appointed by the Supreme Court The property was transmitted into the administrator’s name as personal representative of the estate. Guarantee over Property The property was subject to a mortgage to a bank as the deceased was a guarantor. This property was auctioned as “mortgagee in possession”. The bank’s solicitor, confirmed that the property was due to settle and that it was likely that there would be a shortfall of debt owning to the Bank by the relative. The bank’s solicitor advises the balance of the loan and on repayment in full the guarantee and the mortgage would be released. The decease’s property was sold and settlement took place.