Private ruling: Capital Gains Tax – Deceased Estate – Commissioner’s discretion to extend the two-year period – main residence exemption
Date of advice: 5 December 2018
Published: March 2019
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018
Date scheme commenced: 30 June 20XX

Ruling: Q1: Will the Commissioner allow an extension of time to 30 June 2018 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 purchased a property in 19XX and occupied it until their death in 20XX. The property was never rented out and was the deceased’s principle place of residence. Probate was granted on XX November 20XX, with the deceased’s children, as joint executors and equal beneficiaries of the estate. Prior to their death, the deceased suffered a medical condition and Power of Attorney was obtained by all children to jointly handle the deceased’s financial affairs. It was agreed that Child 1 assume responsibility for all the deceased’s personal, financial and business matters while still alive. Child 1 has been on a disability pension since approximately 19XX. Child 1 also suffers from various health issues. These medical issues prevent them from working. While the deceased was alive, Child 3 borrowed an amount of money from the deceased against their share of the estate not the property. This was a legal loan agreement. The amount of the loan was considered as part of the estate, the property formed part of the calculations of the estate so when divided equal ways, the loan that child 3 had was considered part of their share of the estate. As per the agreement the loan was to be repaid at the final distribution of the estate but all agreed to have the loan terminated earlier, even though the estate had not been distributed. Child 1 held the only keys to the property and remained in control of the property from 20XX/20XX until the end of January 20XX, refusing entry to the other siblings. Child 2 and child 3 sought access to the property from 20XX onwards, which child 1 continually disallowed. Once probate was granted, this left only 9 months to meet the 2 year time limit for sale of the property. Following numerous warnings to child 1, child 2 and child 3 finally gave an ultimatum that they would enter the property at the end of 20XX using a locksmith or by taking legal action. Child 1 then agreed to allow access so legal action was not required. On gaining entry to the property, the interior of the required significant cleaning to be in a saleable state. It took several months of cleaning and clearing the property to have it valued for sale, this wasn’t achieved until mid-20XX and still wasn’t entirely finished. Valuation of the property was required as part of the distribution of the estate to enable child 2 to purchase the property. The Conveyancing Solicitor then realised that one last document needed to be signed to enable transfer of the property to be completed. Child 3, supported by child 1, refused to sign-off on the property, using sign-off as leverage to make child 2 agree to a lesser amount for child 3’s loan repayment, which was less than the loan agreement. A considerable period of conflict arose eventually proceeding to legal action and delaying finalisation of the sale of the property. A compromise was put forward by child 2, to avoid further legal action, and a final price was finally agreed upon in mid-20XX for finalisation of the property on 20XX. The land is less than two hectares. The property has been sold as part of the finalisation of the administration of the estate.

Relevant legislative provisions: Income T ax Assessment Act 1997 subsection 118-195(1) | Income Tax Assessment Act 1997 subsection 118-195