Private ruling: Deceased estates
Date of advice: 26 November 2025
Published: 12 January 2026
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: XX XXXX 20XX

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 vacant land and disregard the capital gain or capital loss you made on the disposal? | A1: No. | Q2: Are you eligible for the partial main residence exemption under section 118-200 of the ITAA 1997? | A2: No. | Q3: Are you required to withhold and remit to the Commissioner tax on each of the non-Australia residents' share of the capital gain by virtue of sections 98(2A) and 98(3) of the Income Tax Assessment Act 1936 (ITAA 1936) and section 115-220 of the ITAA 1997? | A3: No. You are assessed on the capital gain under section 99 or 99A of the ITAA 1936. | Q4: Are you entitled to the Capital Gains Tax (CGT) discount under division 115? | A4: Yes. | Q5: Is the property considered taxable Australian property (TAP) as defined in section 855-15 of the ITAA 1997? | A5: Yes. | Q6: Does the CGT event K3 under section 104-215 of the ITAA 1997 have any application? | A6: No. | Q7: Did the deed entered on XX XXXX 20XX trigger a CGT consequence? | A7: No.

Relevant facts and circumstances: Prior to 19 September 1985, the deceased solely purchased the dwelling located the property. The property is less than 2 hectares. Prior to 19 September 1985, the deceased disposed of the property and then reacquired it again. The deceased lived in the property with their spouse Person A as their main residence. The deceased had children, who together formed the parties. On XX XXXX 20XX, the deceased passed. By the terms of the deceased Will, the deceased appointed Person A to be the sole executor and trustee of their estate, with a provision that if Person A was to survive them but die before the trusts created under the Will were fully performed, the deceased appointed you as the alternative sole executor and trustee of their estate. Pursuant to the terms of clause X the deceased's Will, the deceased provided for Person A to reside in the property during their lifetime and upon their death for the trustee to sell the property and hold the proceeds of same upon trust: • To pay a legacy in the sum of $XX to the child of Person A • To hold the balance remaining upon trust for Person B and Person C, the deceased's sibling, who survived the deceased in equal shares. If Person B or Person C passed in the deceased lifetime their share of the proceeds would go to their lineage who survived the deceased Clause X also provided that no involuntary ceasing to reside in the property shall be construed as ceasing to reside therein by Person A. On XX XXXX 20XX, Person A was granted probate and appointed executor of the Will. The parties hired Lawyer A to act for them. On XX XXXX 20XX, the property title was transferred to Person A as executor of the deceased's estate. On XX XXXX 20XX, the parties lodged a caveat on the title to the property. The parties believed the deceased did not make provision for them under the Will and that they contributed to the property. The parties believed that they could not advance their request for provision under the Will until Person A had passed. The caveat placed on the property protected their rights until a time they could seek provision. On XX XXXX 20XX, Person B passed. Person B was survived by their spouse Person D until they passed on XX XXXX 20XX. Person B's estate was left to their children in equal shares. Person B had the following children: • Person E (passed on XX XXXX 20XX and was survived by spouse and X children); • Person F (passed on XX XXXX 20XX and was survived by spouse and X children); • Person G; • Person H; and • Person I. • On XX XXXX 20XX, Person C passed. Person C had XX children: • Person J; • Person K (passed on XX XXXX 20XX and was survived by X children); • Person L (passed on XX XXXX 20XX and was survived by spouse and X children); • Person M. At the time of their deaths, Person B and Person C were both foreign residents. Their children and grandchildren reside overseas and are also foreign residents of Australia. Person A resided alone in the property as their main residence until they were admitted to location A in or around XX 20XX. Person A was no longer capable of self-care and moving around on their own. From in or around XX 20XX to XX XXXX 20XX, the property remained vacant. On XX XXXX 20XX, Person A passed. Person A's passing triggered the parties to recommence their claim for provision under the Will. By XX XXXX 20XX, the beneficiaries (lineage of Person B and Person C) under the Will were foreign residents of Australia. On XX XXXX 20XX, a fire occurred at the property. The fire report classified the fire as suspicious with malicious activity. The extent of damage was substantial, and the dwelling was uninhabitable. At the time of the fire there was no trustee assigned by the court. You have stated the main reason the property was not rebuilt or repaired was because there was no insurance or funds left in the estate. On XX XXXX 20XX, you formally contacted by Lawyer A regarding the matter. On XX XXXX 20XX, you sent correspondence to Lawyer A, wanting clarification on certain issues and costs. On XX XXXX 20XX, the parties and the other beneficiaries entered a Deed of Settlement. Under the Deed, the parties and beneficiaries agreed: • That an application be made to the Supreme Court for an appointment of a trustee of the estate of the Deceased • As to the sale of the property • The distribution of the estate of the Deceased Under the deed the balance of the estate would be distributed to: • One third to represent the interest of the parties; • One third to represent the interest of Person B; and • One third to represent the interest of Person C. On XX XXXX 20XX, you put forward your terms to administer the estate. On XX XXXX 20XX, you were appointed as trustee by the Supreme Court. You obtained advice from real estate agents that the property should be demolished to obtain the best price. On XX XXXX 20XX, the demolition of the building occurred. On XX XXXX 20XX, the remainder of the building was demolished. On XX XXXX 20XX, you applied to have the caveat removed. On XX XXXX 20XX, the caveat removal was complete. On XX XXXX 20XX, you listed the property for public auction. On XX XXXX 20XX, the property was sold by private treaty as vacant land. On XX XXXX 20XX, the property settled

Relevant legislative provisions: Income Tax Assessment Act 1936 section 98 | Income Tax Assessment Act 1936 section 99 | Income Tax Assessment Act 1936 section 99A | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 104-215 | Income Tax Assessment Act 1997 section 110-25 | Income Tax Assessment Act 1997 division 115 | Income Tax Assessment Act 1997 section 118-115 | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 section 118-200 | Income Tax Assessment Act 1997 section 128-15 | Income Tax Assessment Act 1997 section 128-20 | Income Tax Assessment Act 1997 section 855-15 | Income Tax Assessment Act 1997 subsection 855-20(a)

Reasons for decision: Summary: It is a requirement of section 118-195 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. Therefore, the Commissioner cannot grant a longer period to sell the dwelling and disregard the capital gain or loss under section 118-195 as there is no dwelling. | Detailed Reasoning - Detailed reasoning: 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 the deceased estate. For a dwelling acquired by the deceased before 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. The property was sold more than two years after the deceased's death. Therefore, you require the Commissioner's discretion under section 118-195 of the ITAA 1997 to extend the two-year period to be eligible for an exemption. 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. It is a requirement of section 118-195 that there is a capital gain or loss made from a CGT event that happens in relation to a dwelling . Subsection 118-115(1) of the ITAA 1997 provides that a dwelling includes a unit of accommodation that is a building or is contained in a building and consists wholly or mainly of residential accommodation, and the land immediately under the unit of accommodation. 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 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 as there is no dwelling. | Summary: It is also a requirement of section 118-200 that there is a capital gain or loss made from a CGT event that happens in relation to a dwelling . Therefore, the Commissioner cannot grant a partial exemption 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 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. You will also be entitled to add the demolition costs to your cost base under para 110-25(5)(a) of the ITAA 1997. | Detailed Reasoning - Detailed reasoning: Section 118-200 of the ITAA 1997 considers eligibility for a partial exemption for the sale of a deceased estate dwelling when you are not eligible for a full exemption under section 118-195 of the ITAA 1997. You calculate your capital gain or capital loss using the formula set out in subsection 118-200(2) of the ITAA 1997: CG or CL amount x Non-main residence days / Total days non-main residence days is the sum of: (a) If the deceased acquired the ownership interest on or after 20 September 1985 - the number of days in the deceased's ownership period when the dwelling was not the deceased's main residence; and (b) The number of days in the period from the death until your ownership interest ends when the dwelling was not the main residence of an individual referred to in item 2, column 3 of the table in section 118-195. total days is: (a) If the deceased acquired the ownership interest before 20 September 1985 - the number of days in the period from the death until your ownership interest ends; or (b) If the deceased acquired the ownership interest on or after that day - the number of days in the period from the acquisition of the dwelling by the deceased until your ownership interest ends. It is also a requirement of section 118-200 that there is a capital gain or loss made from a CGT event that happens in relation to a dwelling . Therefore, the Commissioner cannot grant a partial exemption 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 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. You will also be entitled to add the demolition costs to your cost base under paragraph 110-25(5)(a) of the ITAA 1997. | Summary: You are assessed on the capital gain under section 99 or 99A, not under section 98 of the ITAA 1936. | Detailed Reasoning - Detailed reasoning: Taxation Ruling IT 2622 Income tax: present entitlement during the stages of administration of deceased estates , considers the income tax liabilities of executors or administrators and of beneficiaries under the estates of deceased persons during the stages of administration of deceased estates. IT 2622 confirms that the beneficiaries of a deceased estate become beneficial owners of the assets of the deceased after the estate is fully administered. The beneficiaries are not presently entitled to income while the estate is still in administration (e.g., during the right-to-reside period and before final accounts are prepared). Present entitlement generally arises only when the estate is fully administered, and you can make the final distributions. In your case, because the vacant land was sold after the right ended and proceeds are now available, present entitlement would occur at the point you allocate income to beneficiaries for distribution. Accordingly, subsections 98(2A) and 98(3) of the ITAA 1936 would only apply when a non-resident beneficiary is presently entitled to income of the trust estate. In your case, the beneficiaries were not presently entitled at the time of sale because the estate was still being administered. The capital gain is assessed to the estate itself under section 99 or 99A, not under section 98 of the ITAA 1936. No withholding tax applies to capital gains because you will have already paid the tax before distribution. | Summary: You have satisfied the requirements of division 115 and are entitled to the 50% CGT discount. | Detailed Reasoning - Detailed reasoning: Division 115 of the ITAA 1997 provides that if a trust (including a deceased estate) is an Australian resident and the asset was held for at least 12 months, the trust can apply the 50% CGT discount to the capital gain before including it in its net income. In your case, you have satisfied the requirements of division 115 and are entitled to the 50% CGT discount. Sections 115-105 to 115-215 and subdivision 115-C do not affect the estate because the gain is not allocated to beneficiaries. After-tax proceeds are then distributed to both Australian and foreign beneficiaries. | Summary: The property is therefore considered Taxable Australian Property (TAP). | Detailed Reasoning - Detailed reasoning: Section 855-15 of the ITAA 1997 sets out the 5 categories of CGT assets that are TAP in a table. Item 1 in the table at section 855-15 states that taxable Australian property as defined in section 855-20 of the ITAA 1997 is considered CGT assets that are TAP. Subsection 855-20(a) of the ITAA 1997 states that taxable Australian real property is real property situated in Australia (including a lease of land, if the land is situated in Australia). The property is therefore considered TAP. | Summary: CGT event K3 under section 104-215 of the ITAA 1997 has no application in the circumstances. | Detailed Reasoning - Detailed reasoning: CGT event K3 is only triggered when an asset passes to foreign resident and is not taxable Australian property. In your case, the property was sold by the estate and did not pass to a foreign resident. In addition, the property is considered Australian taxable. CGT event K3 under section 104-215 of the ITAA 1997 has no application in the circumstances. | Summary: The deed did not trigger a CGT consequence. | Detailed Reasoning - Detailed reasoning: Section 128-15 of the ITAA 1997 provides that any capital gain or loss a legal personal representative makes if a CGT asset passes to a beneficiary of a deceased estate is disregarded. Subsection 128-20(1)(d) of the ITAA 1997 states that a CGT asset passes to a beneficiary of a deceased estate under a deed of arrangement if: i. the beneficiary entered into the deed to settle a claim to participate in the distribution of the estate; and ii. any consideration given by the beneficiary for the asset consisted only of the variation or waiver of a claim to one or more other CGT assets that formed part of the estate. Taxation Ruling TR 2006/14 Income tax: capital gains tax: consequences of creating life and remainder interests in property and of later events affecting those interests explains that for the purposes of paragraph 128-20(1)(d) of the ITAA 1997 a deed of arrangement must be entered into prior to the administration of the estate being completed unless the beneficiary can demonstrate that a court would, at the time the deed was entered into, have entertained their application for family provision, or an extension of time in which to make such an application. Further, a taxpayer is not required to commence legal proceedings to establish, for the purposes of paragraph 128-20(1)(d) of the ITAA 1997, that they have a claim to participate in the distribution of the assets of the estate. A claim may be established by a potential beneficiary communicating to the trustee their dissatisfaction with the will. In your case, the parties and the other beneficiaries entered a Deed of Settlement under the Will prior to the administration of the deceased estate being completed. Further, any consideration given by the beneficiaries for the respective assets will consist only of the variation or waiver of a claim to one or more other CGT assets that form part of the estate. Consequently, any capital gain the Trustee of the deceased estate makes on the transfer of the deceased's real property interests to the beneficiaries of the estate was disregarded.