Private ruling: Deceased estate - Commissioner's discretion to extend the 2-year period to dispose of the deceased's property
Date of advice: 11 March 2026
Published: 28 April 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise their discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 to allow an extension of time in relation to the sale of the Property? | A1: Yes. We have balanced the facts of the situation being ruled on when making our decision, with some being arguably unfavourable, such as the time taken on the activities to prepare the Property for sale. However, other facts are favourable, such as the complexity of the Will, the creation of a trust, the wishes of the deceased person in relation to the Property, having to take steps to evict one of the beneficiaries who did not wish to leave the Property, the death of the original executor and the substituted executor had undertaken the majority of activities in relation to getting the Property sold in a timely manner after being appointed in that role. The favourable factors account for most of the delay whereas the arguably unfavourable factors only accounted for a short period of delay. Having considered the factors and circumstances of the situation being ruled on, and the reasons for the delay in the disposal of the property after the deceased person had passed away, the Commissioner will exercise their discretion and allow an extension of time until settlement on the sale of the Property occurred. Therefore, any capital gain or loss made in relation to the disposal of the Property can be disregarded under subsection 118 195(1) of the ITAA 1997. Further information about the Commissioner's discretion can be found by searching ato.gov.au for 'QC 66057'.

Relevant facts and circumstances: After 20 September 1985, Person A purchased a property (the Property) which had a land area of less than two hectares, with a house located on it. Person A lived at the Property after it was purchased and it was not used for income producing purposes during their ownership period. Some years later Person A (the Deceased) passed away, being survived by their children, being Person X and Person Y, and their sibling, Person Z. The instructions in the Deceased's Will included the following: • Person X to be appointed as the sole executor and trustee of the Will, and if they died before the estate was completely administered then Person Z would be appointed as the sole executor and trustee of the Will. • The residual of the estate to be used and bequeathed as follows: - To pay and discharge all debts and due amounts, funeral and testamentary expenses - Specific gifts outlined that the residual of the estate was to be bequeathed as follows: o Specified items and monies to the Deceased's partner o A specified percentage share to Person X if they survived the Deceased, and if they hadn't survived then any child they had would receive an equal share in the specified percentage of the residual estate as tenants in common; and o A specified percentage share to trustees to establish a trust (the Trust) under clause C of the Will. The trustee would be Person X and if they died then Person Z. The listed beneficiaries of the trust were Person Y, any of their children, any grandchildren of Person X, and other specified beneficiary/beneficiaries - It was provided that the Deceased's express wish, without creating any legal obligation, that provided there are sufficient assets in the estate that the Deceased's principal place of residence at the time of their death, formed part of the specified gift at clause C of the Will. Person Y lived at the Property prior to the Deceased's passing and continued to live there after the Deceased passed away. The Property was not used for income producing activities on or after, the date the Deceased passed away. Person X did not engage the services of any legal professional in relation to the administration of the estate and had undertaken activities in relation to the administration of the estate themselves. Several months after the Deceased passed away probate for the estate was granted to Person X as the executor of the estate. Person X distributed the specified gifts in accordance with the Will. Person X passed away prior to the administration of the estate being completed. Person Y had not understood that the Will did not give them a right to live at the Property, even though the Trust had been set up in accordance with the Will for their benefit. Person Y contacted a legal firm (the Legal Firm) to assist with the administration of the estate. After a short period, Person Z had discussions with the Legal Firm in relation to the administration of the estate. During the following month Person Z had notified the Legal Firm that due to their ongoing health issues and medical advice they were not able to continue in the role as substitute executor. Some months later, Person Z engaged the services of the Legal Firm to assist with the administration of the estate which included obtaining probate to appoint them as the substitute executor, as there was no alternative person to undertake the role. Several months later Person Z was granted probate of the estate as the substituted executor. The Property could not be transferred to the Trust for Person Y's benefit in accordance with the Will as the estate did not have sufficient assets for the Property to represent specified percentage of the residual of the estate. As a result, the sale of Property was required as part of the estate's administration. Person Y refused to move out of the Property and steps were taken to evict them from the Property with the Legal Firm sending a notice to vacate the Property to Person Y. Person Z received a text message from Person Y requesting an extension of time to vacate the Property. Person Y vacated the Property. The Property was tidied up prior to it being put on the market. Person Z spoke to real estate agents in relation to selling the Property. The Property was put on the market for sale. After a short period, a contract of sale of the Property was entered into, with settlement on the sale of the Property occurring after the two-year anniversary of the Deceased's passing.

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