Private ruling: Commissioner's discretion - deceased estate
Date of advice: 23 March 2022
Published: June 2022
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner allow an extension of time for you to dispose of your ownership interest in the property and disregard the capital gain you make on the disposal? | A1: Yes. Practical Compliance Guideline PCG 2019/5 The Commissioner's discretion to extend the two year period to dispose of dwellings acquired from a deceased estate indicates that generally work done to improve the condition of a dwelling as it existed at the time the deceased passed away is not a reason for delay that is favourable for the exercise of the discretion. However, it also indicates that repairs undertaken due to damage that unexpectedly arose after the deceased passed away is a reason for delay that is favourable for the exercise of the discretion. In your case, both types of repairs were carried out. After weighing up all the facts we concluded that it was appropriate to allow an extension. Further information about this discretion can be found by searching 'QC 66057' on ato.gov.au.

Relevant facts and circumstances: At some time after 1985 the deceased and their spouse purchased the property. The property size is less than two hectares. Many years later, the property passed to the deceased solely after divorce. Several years later, the deceased passed away. The property was the deceased's principal place of residence from date of purchase until the date of their death. It was not rented or left vacant for any period prior to their death. Shortly after, administration of the estate commenced. The deceased's X children, were joint executors of the deceased's will. There were delays in the administration of the estate, particularly in distributing funds from the deceased's superannuation account and X requisition notices from the titles office relating to transfer of the property. The physical distance of the executors also caused some delays in the signing of original bank and titles documents. Shortly after, title of the property was transferred to the children, as beneficiaries and tenants in common. Within the two year period, the property was rented and some repairs were carried out. The executors intended to dispose of the property shortly. Subsequently, still during the two year period, a weather event caused significant damage to the property requiring extensive repairs. An insurance claim was lodged with an insurer. The insurer engaged a construction company as project managers for the repair work. There were significant delays in procuring builders and materials, in part due to labour and materials shortages as a result of the COVID-19 pandemic. Over several months, building contractors attended property to assess and take measurements, and insurance building repair work commenced on the property. Once all building and rectification work was complete, a real estate agent was engaged to sell property. Shortly after, the insurer advised that the claim had been completed, a contract for sale of property was signed and the property settled.

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