Private ruling: Commissioner's discretion - deceased estates
Date of advice: 27 February 2026
Published: 20 April 2026
Ruling period: Year ended 30 June 20YY
Date scheme commenced: DD MM YYYY

Ruling: Q1: Will the Commissioner exercise the discretion under section 118-195 of Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time for you to dispose of your ownership interest in the dwelling and disregard the capital gain or capital loss you made on the disposal? | A1: No.

Relevant facts and circumstances: You are the deceased children. Prior to 20 September 1985, the deceased and Person A jointly purchased the dwelling located at the property. The property is less than 2 hectares. The property was the deceased main residence. On DD MM YYYY, the deceased executed their last Will and testament. Under clause XX of the Will, you were appointed executors and trustees. Under clause XX of the Will, the deceased left their whole estate to Person A provided they survived them for XX days. Under clause XX of the Will, should Person A not survive the deceased for 30 days then the deceased left the residuary estate to you equally. The property was not specifically mentioned in the Will and formed part of the residuary of the estate. On DD MM YYYY, Person A passed. On DD MM YYYY, the deceased moved to aged care due to urgent and unplanned health issues. After DD MM YYYY, the property was left vacant until it was sold. On DD MM YYYY, the deceased passed away. On DD MM YYYY, you were granted probate. On DD MM YYYY, the property was transferred to you as tenants in common. For a period, you spent most weekends cleaning and clearing the property of the deceased possessions. Between a period, you and a person known to you were in discussion to privately rent the property to them. This did not eventuate. Between a period, you contacted XX real estate agents to assess the condition of the property with the view to renting it. On DD MM YYYY, you engaged the real estate agent, to bring the property into a liveable condition with the view to renting it. In early MM YYYY, the agent outlined the initial scope of works required to bring the property into a liveable state for a rental. In MM YYYY, some repairs and remedial works were completed at the property. On DD MM YYYY, you were informed by the agent that mould was discovered in the bedrooms and that a coat of paint would be needed. On DD MM YYYY, you received correspondence from the agent of additional items which were required addressing to bring the property into a liveable state for a rental. On DD MM YYYY, you were advised by the agent of all the works completed so far and they asked if you were certain that a rental was the best option as they were finding more works that needed to be completed. In early MM YYYY, you sent correspondence to trades people inquiring about the requirement to bring the property to a suitable condition if you decided to sell the property. On DD MM YYYY, you informed the agent of your intention to sell the property on an as if condition. On DD MM YYYY, the agent advised your lawyers and conveyancers of an auction date to be scheduled in late MM YYYY allowing time to complete works on the property, preparation of legal documents and allow for open inspections. For a period, you attended the property preparing it for sale. On DD MM YYYY, the property was privately sold prior to the auction. On DD MM YYYY, the property settled.

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

Reasons for decision: Summary: A capital gain or capital loss may be disregarded where a capital gains tax event happens to a dwelling if you owned it as the trustee or beneficiary of the deceased estate. For a dwelling acquired by the deceased prior 19 September 1985, you will be entitled to a full exemption if your ownership interest ends within two years of the deceased's death. Your ownership interest ends at the time of settlement of the contract of sale. In your case, the deceased acquired the property prior to 19 September 1985. The property sale settled more than two years after the deceased's death. Therefore, you require the Commissioner's discretion to extend the two-year period to be eligible for an exemption. 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 provides guidance on factors we consider when deciding whether to grant the discretion. Paragraph 3 of PCG 2019/5 provides that we will allow a longer period where the dwelling could not be sold and settled within two years of the deceased's death due to reasons beyond your control that existed for a significant portion of the first two years. Paragraph 14 of PCG 2019/5 explains we weigh up all of the factors (both favourable and adverse). Paragraph 17 of PCG 2019/5 provides a list of other factors that may be relevant to the exercise of the Commissioner's discretion which includes the sensitivity of your personal circumstances. In your case, we consider as favourable factors: • The current state of the property required repairs. • It took time to clean the property. • You sold the property in an 'as is' condition. We also considered that it was your intention to rent the property for a period. The circumstances were under your control and most of the delay was caused by your intention to rent the property or prepare the property for rent. Having considered the relevant facts, we will not apply the discretion under subsection 118- 195(1) of the ITAA 1997 to allow an extension to the two-year time limit. Therefore, the normal CGT rules will apply to the disposal of the property. You should note that the first element of your cost base for the property is its market value on the deceased's date of death. The cost of repairs can also be included in the cost base of the property. You are also entitled to the 50% CGT discount in relation to the property.