Private ruling: Deceased estate
Date of advice: 19 December 2025
Published: 9 February 2026
Ruling period: Year ending 30 June 20YY
Date scheme commenced: DD MM 20YY

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: Before 20 September 1985, The Deceased acquired a property at XXX XXX (the Property). On DD MM 20YY, the Deceased passed away. The Property is less than 2 hectares. The Property was the Deceased's main residence until they passed away. The Property was never used for the purpose of producing assessable income during the Deceased's ownership. The Property formed part of the deceased estate. A number of years prior to the Deceased's death, one of the beneficiaries of the Deceased's estate, person 1 moved into the dwelling with their family to provide the Deceased with companionship and support until the Deceased passed away in 20YY. You have provided a copy of the Deceased's Will. Clause XX of the Will granted person 1 and their family the 'the use and occupation for no more than two (2) years' following the Deceased's death, rent free. On DD MM 20YY, probate was granted to four of the Deceased's children as executors. The estate was left on trust to be divided into XX equal parts or shares and to distribute as one part to each of the children and one part to be shared between the grandchildren. On DD MM 20YY, the names of the four executors were registered on the title as personal representatives of the Deceased. In recognition of person 1's support for the Deceased, the other beneficiaries agreed that person 1 should remain in the house rent free until the estate was finalised. On DD MM 20YY, the Property title was amended to register the ownership interest of the XX beneficiaries. The children of Deceased each held a XX share of the Property. The grandchildren held a XX share of the Property. The Property was sold in XX stages by agreement between the initial beneficiaries to sell their share in the Property to person 1. Over time, the number of family members with a stake in the property gradually decreased from XX to 1. The execution dates for the XX transactions appear to be: • DD MM 20YY, the shares of 1 child of the deceased and 2 grandchildren of the deceased were purchased and transferred to person 1. The remaining beneficiaries agreed to sell their shares in the Property to person 1 when it was financially feasible. The alternative was to force the sale of the entire property to a third party. • DD MM 20YY, the shares of 1 child and a part share of another child were sold to person 1. • DD MM 20YY, your sold your share, the remaining shares of another child and the other grandchildren were sold to person 1. On DD MM 20YY, you sold your share in the Property to person 1. The Property title was amended to reflect the transfer of your ownership to person 1.

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

Reasons for decision: Detailed Reasoning - Detailed reasoning: 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 after 20 September 1985, that was the deceased's main residence and not used to produce assessable income just before their death, 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 before 20 September 1985, and the dwelling was, from the Deceased's death, the main residence of an individual who had a right to occupy the dwelling under the Deceased's Will. Clause XX of the Deceased's Will provided for one beneficiary and their family with a right to occupy the dwelling for no more than 2 years following the Deceased's death. The right to occupy ceased on DD MM 20YY. After the Deceased passed away and the right to occupy ended, you owned the Property as a beneficiary of the estate. The dwelling was the Deceased's main residence until just before they died and was not used to produce assessable income at that time. 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 12 of the PCG 2019/5 provides the favourable factors we take into consideration and paragraph 13 lists the unfavourable factors we consider. 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. | Detailed Reasoning - Reasons for the delay: You have provided in your ruling application the reasons for the delay in selling the Property. | Detailed Reasoning - Consideration of your circumstances: In this case the Commissioner has not exercised his power to extend the two-year period. We have taken the following into consideration when making our decision: We acknowledge that there were XX-part owners of the Property. However, the Deceased died on the DD MM 20YY and the right to occupy the dwelling given to person 1 was a maximum period of XX years. The right to occupy the dwelling ceased on DD MM 20YY. The Property was sold in XX stages on DD MM 20YY, DD MM 20YY and your share on the DD MM 20YY this is XX months after person 1's right to occupy the dwelling ended. As per PCG 2019/5 Paragraph 3, generally, we will allow a longer period where the dwelling could not be sold and settled within 2 years of the deceased's death due to reasons beyond your control that existed for a significant portion of the first 2 years. Paragraph 11 states during the first 2 years after the deceased's death, more than 12 months was spent addressing one or more of the circumstances described in paragraph 12 of the PCG 2019/5. Paragraph 12 states one or more of the following circumstances must have taken more than 12 months to address: • the ownership of the dwelling, or the will, is challenged • a life tenancy or other equitable interest given in the will delays the disposal of the dwelling • the complexity of the deceased estate delays the completion of administration of the estate • settlement of the contract of sale of the dwelling is delayed or falls through for reasons outside of your control, or • restrictions on real estate activities imposed by a government authority in response to the COVID-19 pandemic. The information and documentation provided does not support that the Deceased's estate was of a complex nature. Therefore, this is a factor that the Commissioner would take into consideration when making the decision on whether to exercise the discretion to extend the two-year period to dispose of the property. We considered the right to occupy the property allowed for another XX years which gave the beneficiaries XX years to administer the estate, we believe XX years is a sufficient time to finalise the estate. We also considered the beneficiaries made a personal choice to allow person 1 to continue living in the dwelling as per PCG 2019/5 example 2 no safe harbour - family member residing in dwelling In this example the taxpayer was not given a favourable outcome because the executors gave permission for a family member to continue to live in the dwelling and this was a matter of choice within the control of the executors. While person 1 did have a right to reside for XX years, the beneficiaries granted person 1 additional time, beyond the XX year limit, to remain in the dwelling, and this is a personal choice made by the beneficiaries. In regard to theother reasons providedwe consider XX years in total, that is two years under section 118-195 and the safe harbour provision, with the right to occupy gave the executors sufficient time to administrate the estate. We find the delay was within your control and therefore the Commissioner has not exercised the discretion. | Detailed Reasoning - Conclusion: The Commissioner's discretion is meant to be limited to situations where the owner is effectively prevented from selling the Property. The intention of the two-year period is to allow the orderly and timely sale of the deceased's estate. 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 capital gains tax (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. Having held the Property for over 12 months you may be entitled to the 50% CGT discount in relation to the Property.