Private ruling: CGT - deceased estate
Date of advice: 21 May 2026
Published: 3 August 2026
Ruling period: Year ending DD MM 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Will the Commissioner exercise the discretion under section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time to dispose of the ownership interest in the property and disregard the capital gain made on the disposal? | A1: No. | Q2: Are you required to pay CGT for the relevant period? | A2: Yes. | Q3: Are you entitled to a partial main residence exemption for a number of months? | A3: Yes.

Relevant facts and circumstances: The deceased and their spouse purchased the property. The property was their main residence for the whole of their ownership period. The deceased's spouse passed away several years ago, and the deceased passed away later the same year. The property was never used to produce assessable income before or after the deceased passed away. The property was less than X in size. Probate was granted a few years after the deceased's date of death. The deceased's adult child lived in the property with their parents for an extended period of time and had a right to reside in the property until they remarried or gave up the life interest under the deceased's will. The deceased's child passed away in the year that probate was granted. The delay in the disposal of the property from the date of the deceased's child death to the date of sale was the result of the following circumstances: 1) There was some uncertainty as to what items in the property formed part of the deceased estate and which items formed part of the deceased's child's estate. 2) Following the death of the deceased and their spouse in quick succession, the deceased's child's mental state was not great. During the years where they were living in the property without their parents, they: a) Let the house fall into a state of disrepair; and b) Became X 3) The executor of the deceased's estate lives some distance from the property. Following the child's death, the executor and their spouse travelled to the property on weekends (as often as they could, without impacting their own lives to: a) clear out the accumulated possessions/mess; and b) to bring the property to a state where it was fit for sale. The property was placed on the market in the year after probate was granted. A contract to sell the property was entered into. Settlement took place in the month after the contract was signed.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-110 | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 section 118-200

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 DD MM 19YY 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 DD MM 19YY, 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. Application to your circumstances : The Deceased passed away a number of years ago. The deceased's will gave their child the right to live in the property, and they did until they passed away. The right to reside in the property made up a few years of the delay in selling the property. After the child passing it took the executor a number of months to put the property on the open market for sale and a further couple months before a contract of sale was entered. The delay by the executor was not outside their control as the facts clearly state that they went to the property on weekends as often as they could, "without impacting their own lives". The property could have been placed on the market at an earlier date. It is for this reason that the Commissioner will not be exercising the discretion to disregard the whole capital gain made on the sale of the property. You can get a partial main residence exemption for the relevant period as the deceased's child had a right to live in the property under the will. Section 118-200 of the ITAA 1997 allows a partial main residence exemption to be calculated. For the relevant period CGT will be payable as these are non-main resident days. You are able to apply the 50% discount to the capital gain.