Private ruling: CGT - deceased estate
Date of advice: 7 October 2025
Published: 24 November 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the discretion under subsection 118-195(1) of Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of the 2-year period for the disposal of a dwelling, available where the property is vacant land? | A1: No.

Relevant facts and circumstances: On XX/XX/20XX, the deceased passed away. At the time of their death, the deceased owned the property as tenants in common in equal shares with their spouse (S). The property was the main residence of the deceased. It was acquired by prior to 1985. The deceased left a will appointing S as the executor and providing S with a life interest over the deceased's share in the property. S has had poor heath and was diagnosed with a serious illness in 20XX. In XX/20XX, the property was destroyed by fire. S was advised by the fire services that they believe the fire was caused by an electrical fault. Consequently, the property was now vacant land. S had further operations. In 20XX, COVID restrictions delayed the sale of property due to lockdowns and limits on real estate agents. The vacant land was sold on XX/XX/20XX. Settlement occurred on XX/XX/20XX. No income was earned from the property after the deceased's death.

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 (CGT) event happens to a dwelling if you owned it as the trustee or beneficiary of a deceased estate. Pursuant to the table in subsection 118-195(1) of the ITAA 1997, where the deceased acquired the ownership interest in a dwelling before 20 September 1985, a capital gain or loss is disregarded when the ownership interest in the dwelling is disposed of within two years of the deceased's death, or a longer period allowed by the Commissioner. Practical Compliance Guideline PCG 2019/5 Capital gains tax and deceased estates - the Commissioner's discretion to extend the 2-year period to dispose of dwellings acquired from a deceased estate outlines the factors that the Commissioner will take into consideration when deciding whether to exercise the discretion to extend the 2-year period. However, it is a requirement of section 118-195 of the ITAA 1997 that there is a capital gain or loss made from a CGT event that happens in relation to a dwelling . The provision does not apply to vacant land even if it previously contained a dwelling which was the deceased's main residence. There is no exception within section 118-195 of the ITAA 1997 which allows the discretion to be applied in situations where the dwelling has been destroyed. Therefore, the Commissioner cannot grant a longer period to sell the dwelling and disregard the capital gain or loss under section 118-195 of the ITAA 1997 as there is no dwelling. When the vacant land was sold, CGT event A1 occurred and a capital gain or capital loss will need to be determined. As the deceased's ownership interest in the property was a pre-CGT asset of the deceased, the first element of its cost base is its market value at the deceased's date of death.