Private ruling: CGT – deceased estate – Commissioner’s discretion to extend the two year period to dispose of a dwelling
Date of advice: 27 March 2019
Published: May 2019
Ruling period: Income year ending 30 June 2019.
Date scheme commenced: 1 July 2018.

Ruling: Q1: Will the Commissioner exercise his discretion under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to the two year period? | A1: Yes. After reviewing the information and documentation provided, and considering the facts of your situation, the Commissioner will allow an extension of time. Further information about this discretion can be found by searching ‘QC 52250” on www.ato.gov.au .

Relevant facts and circumstances: The Deceased purchased a property (the Property) after 20 September 1985. The Deceased engaged the services of a legal firm to prepare a draft will for them which outlined that the Property would be bequeathed to a relative of the Deceased (Person B), on their passing. However, the draft will was not finalised. Person B and their partner, Person C, moved into the Property with the Deceased. After a number of months the Deceased passed away. The Property was the Deceased’s main residence just prior to their passing away. The Deceased had passed away intestate and you, being Person A, were appointed as the administrator of the Deceased’s estate. The major asset of the Deceased’s estate was the Property. You engaged the services of a legal firm, Company ABC, to obtain letters of administration and finalise the Deceased Estate’s affairs, with the granting of the letters being made by the Court during the following year after the Deceased had passed away. You were advised that prior to selling the Property the house and surrounds should be cleaned, which involved the removal of rubbish. Persons B and C refused to clean the Property themselves, and denied you and other parties’ access to the Property to undertake the activities required to get the Property into a saleable condition. A number of months after the letters had been made by the Court, Person B sent a letter to Company ABC setting out their claim that the Property be transferred to them in accordance with the alleged wishes of the Deceased, and that they wanted to resolve the issue without resorting to litigation. Around the same time you engaged the services of legal firm Company XYZ who attempted to engage Person B in relation to their claims, without any success. After a number of months Person B lodged a caveat over the Property and refused to withdraw it. After a short period of time you commenced legal proceedings against Persons B and C as the Defendants. Persons B and C had a specified period of time to provide a claim against you and they filed a defence asserting a resultant and/ or constructive trust had been created based partly on the contents of the draft will and partly on alleged statements they attributed to the Deceased. Both you and Persons B and C filed further particulars of each of their respective claims in addition to providing disclosure to one another At the Court hearing you and Persons B and C agreed to further procedural steps required including timelines for their compliance, which included mediation to be held no later than a specified date. However, the mediation did not occur by the specified date due to the unavailability of counsel and the agreed mediator. Mediation occurred a number of months after the Court hearing when the issue was settled and an agreement (the Agreement) was signed by you and Persons B and C which included the following terms: ● the Property will be sold by public auction by a specified date; ● You would appoint a real estate agent of your choice to market and sell the Property; ● Persons B and C would deliver up possession of the Property to you by a specified date by delivering the keys to you; ● Persons B and C would vacate the Property; ● You would instruct the agent to prepare or schedule works that the agent considers are necessary to bring the Property into marketable condition, with the costs being capped at a specified amount; ● the proceeds from the sale of the Property to be distributed as follows: − in payment of the costs of sale; − a specified amount to Person B in reimbursement of the Deceased’s funeral costs; and − the net balance of the proceeds to be distributed 67.5% to you and 32.5% to Person B ● You and Persons B and C agreed to release and discharge each other from and against all claims, demands, costs, expenses, proceedings, or any other loss or liability of any kind arising out of or in connection with the subject matter of the proceeding, the Deceased Estate, or the Property. After a short period a court order was issued outlining that you and Persons B and C had reached an agreement to resolve the proceedings and that the proceedings would be dismissed. A contract for the sale of the Property was entered into with settlement occurring on more than two years after the Deceased had passed away.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 102-20 | Income Tax Assessment Act 1997 Section 104-10 | Income Tax Assessment Act 1997 Section 118-195