Private ruling: Capital gains tax - deceased estate
Date of advice: 17 November 2025
Published: 5 January 2026
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will the Commissioner exercise the discretion under section 118-195 of the Income Tax Assessment Act 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: The deceased passed away several years ago. The deceased acquired the property prior to 20 September 1985. The property was less than 2 hectares in size. The deceased did not have a current Will. In the year following the date of death, the solicitor certified the Supreme Court Order for Letters of Administration, which enabled you to commence finalising the deceased's affairs. The letters of administration appointed Individual Z and Individual Y as the estate's administrators. Multiple individuals were named as beneficiaries of the estate. Following this, the process of sorting through the assets of the estate began. The closure of a number of bank accounts held by the deceased took several months to complete. You then had a highly complex shared land ownership issue with other relatives relating to a property (property 2), which was purchased from the Crown by your family and had been used for grazing cattle. The deceased owned a percentage of property 2 along with relatives that owned the remainder. Property 2 was required to be sold, and the sale of property 2 became the focus of the executors of the estate, whilst the sale of the property was left. The Government made things very complex for property 2. During the COVID-19 lockdown, the Government made property 2 into a wildlife protected zone. Due to this, it was very hard to sell property 2. The local council zoned property 2 as residential. These issues relating to property 2 took up a lot of time and resources. Eventually, a developer purchased property 2, however they wanted to set up a trust for each of the blocks for property 2, which took more time. The World Health Organisation (WHO) declared the COVID-19 pandemic. The first stage of the Nationwide Lockdown commenced for the COVID-19 pandemic. There were more COVID-19 pandemic lockdowns. During these lockdowns, a person wasn't to leave their principal place of residence for various reasons. There were various short- and long-term lockdowns implemented by the State Government. After the completion of the COVID-19 periods, there were a lot of personal affairs for everyone, that had to be caught up on to get back to normal life. These personal matters were: • There were things to do with Individual Z's Health. • Personal and financial issues in life had to be re looked at after a "once in a lifetime Pandemic". • As no other family members were helping, Individual Z's family had to balance between catching up on their personal life and keeping and progressing cleanup of the property and the deceased's other affairs. • Individual Z's family's business and child who was the apprentice and working things post Pandemic with their apprenticeship. Ensuring they were fulfilling their requirements in regards to the apprenticeship. • Weddings in the family and getting with their newly married kids. • Individual Z's tax return and the deceased's tax return. Some things with the deceased's accountant were difficult because of changed working situations and some info wasn't easily gotten, with lockdowns and the pandemic. • Individual Z had to get their siblings on the same page with the deceased property and their relatives on the same page with getting property 2 sold. • Real Estate Agent issues to be sorted out. • They had to track down the deceased's retired investment adviser. To clarify some problems with their past investments. • There was a delay in progress in many areas that meant things had slowed down at the least, or stopped for a bit. Then you have to get it all back together The sale of the property went through various talks and negotiations. Things seemed to fall through, or people were trying to serve their own interests or seem to take advantage of the estate and not be fair. List of attempts to negotiate a sale: a. Owners of an adjacent property. In talks with them as they wanted to offer both properties to a Developer at the same time. The administrators were in talks, and they went quiet and then sold their property on their own but didn't mention anything to the administrators. b. A third party approached the estate - the next owner of the adjacent property trying to negotiate with the estate as they wanted to amalgamate the properties. They ended up not going ahead with anything, but a lot of time was used communicating and working this through. c. A Real Estate Friend of the family talked with the administrators of the pro's and con's of a lot of different options with the house. This info was taken back to Individual X and Individual Y. d. Individual Y was emotionally attached to the deceased's home with the mental health issues that they were going through. They were going to buy the house on several occasions then said it would be best to sell to someone else. e. Individual Y child - Individual Y wanted their child to buy the house as they found it hard to part with. The child couldn't get a home loan in the end. f. There were a few seemingly genuine offers. Some of the properties building problems meant the contracts didn't go ahead in the end. The final buyer had no Building or Pest Inspection requirements. You believe that is why it sold and there were no hold ups. You resumed cleaning up the property and selling assets of the deceased that you were able to. The deceased had a very large volume of assets and items to sort through. You had spoken with the deceased prior to their death, and they did not want you to disturb any of their items held in the property. Individual Z did the bulk of the disposing of junk and rubbish, cleaning up, giving away and selling antiques and vintage items, bit by bit. Individual Z was hindered by some health issues. Individual X lives in a different part of the State and didn't assist with the clean-up of the property. Individual Y was quite emotionally attached to the property and was still grieving the loss of the deceased. Due to this, Individual Y found it difficult to clean up anything at the property. Individual Z had some medical issues. Following these issues, no lifting was allowed for several months later. As Individual Z was the main person who was cleaning up the property, this delayed the preparation of the sale of the property. The final cleaning of the property, sale and disposal of goods, and preparation of the property for sale took place. An e-mail was sent to a selling agent, with the listing and advertising process being completed earlier this year. Due to the state of the property, it was never used to produce income following the death of the deceased, as it would have required a lot of cost to make the property fit for tenants to occupy. No refurbishments were done to the property, only general cleaning up. You entered into a contract to sell the property with settlement occurring in the middle of this year.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-195

Reasons for decision: Summary: The main residence exemption in section 118-110 of the Income Tax Assessment Act 1997 (ITAA 1997) applies to disregard a capital gain or capital loss a taxpayer makes from a capital gains tax (CGT) event that happens to a dwelling that is their main residence. If a taxpayer inherits an ownership interest, subsection 118-195(1) of the ITAA 1997 applies so that any capital gain or capital loss they make from a CGT event that happens in relation to a dwelling or their ownership interest in a dwelling is disregarded if: • They are an individual and the interest passed to them as a beneficiary in a deceased estate, or they owned it as the trustee of a deceased estate; and • The deceased acquired the ownership interest on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death, and was not then being used for the purpose of producing assessable income; and • Their ownership interest ends within two years of the deceased's death, or within a longer period allowed by the Commissioner. Where the deceased acquired the property prior to 20 September 1985, the dwelling was from the deceased death until your ownership interest ends the main residence of one of the following: • the spouse of the deceased immediately before their death (but not a spouse who was permanently separated from the deceased) • a person who has a right to occupy the property under the deceased's will • you, as a beneficiary, if you dispose of the property as a beneficiary. Generally, the Commissioner would exercise the discretion in situations where the delay is due to circumstances which are outside of the control of the beneficiary or trustee, for example: • The ownership of a dwelling or a will is challenged. • The complexity of a deceased estate delays the completion of administration of the estate. • A trustee or beneficiary is unable to attend to the deceased estate due to unforeseen or serious personal circumstances arising during the two-year period (for example, the taxpayer or a family member has a severe illness or injury). • Settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary or trustee's control. Factors that would weigh against the granting of the discretion include: • Waiting for the property market to pick up before selling the dwelling. • Property used to earn assessable income. • Unexplained periods of inactivity by the executor in attending to the administration of the estate. The above examples are not exhaustive. In addition, once any circumstances preventing the sale of the Property have been resolved, the Property needs to be placed on the market as soon as possible to enable its disposal. | Detailed Reasoning - Application to your circumstances: Letters of administration were issued several years ago. The pandemic occurred from around March 2020 when lock downs were commencing, this was a number of months after the deceased had passed. There was nothing done to progress the sale during the above period. We acknowledge that person B has had some health problems, but these occurred several years later, these problems do not explain why it took so long to sell the property prior to that time. It is clear from the facts that a conscious effort was made to sell property 2 and the property was left to be sold. While covid did impact movement it did not prevent properties from being sold in this period. In this regard, we consider that the delay was not outside your control. It is for the above reasons that you do not meet the requirements for the Commissioner to extend the 2-year time period as the property could have been sold at an earlier stage. The Commissioner will not be exercising his discretion to extend the 2-year period for you to dispose of the Property. Therefore, any capital gain made on the property from the date the deceased passed away until the Property was disposed of will be subject to tax. Australian tax residents are entitled to the 50% CGT discount in relation to the property.