Private ruling: CGT - deceased estate
Date of advice: 15 December 2025
Published: 2 February 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 (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.

Relevant facts and circumstances: The deceased passed away several years ago. The deceased was a tax resident of Australia when they died. The deceased died intestate. The deceased was survived by their child (Individual Z). The deceased had a number of other children who had passed away prior to the deceased. The deceased had a number of additional relatives. At date of death, the deceased owned the property. The property was the only asset in the estate. The property was acquired by the deceased a number of decades ago. The deceased used the property as their main residence from its acquisition until their date of death. The property was never used to derive income prior to their death or after their death. Individual Z lived with the deceased in the property. We were advised that Individual Z suffered with a health condition. Individual Z continued to live in the property after their parent died. We were advised that the relatives of the deceased assumed that Individual Z was left the property by the deceased, and they did nothing to administer the estate due to this assumption. Individual Y regularly visited Individual Z at the property. Individual Z was diagnosed with a severe medical condition. Individual Y had keys to the property and would check on the property while Individual Z was in hospital and while they received treatment for their condition. Individual Z continued to live in the property as their main residence until they died Individual Z paid all relevant expenses from when the deceased passed away until their death. Individual Z died intestate. After Individual Z died, Individual Y made enquiries in relation to the property. A title search was conducted on the property, and it showed that it was still registered in the deceased's name. Individual Y took steps to commence the process of administering the deceased's estate and Individual Z's estate. Due to a sudden family death, Individual Y had to take some time away from administering the estate to grieve. Individual Y resumed the estate administration process, with an application for Letters of Administration for the deceased's estate and Individual Y's estate. A summons was filed for each estate. Both Individual Y and Individual X had standing to apply for Letters of Administration. A requisition from the Court stated that Individual Y must make every attempt to locate Individual X as the courts required their consent prior to issuing letters of administration. Individual Y and Individual X had been estranged from each other for some time and Individual Y could not locate and obtain consent from Individual X. The matters were contested, and the Court made an order for Individual M to be appointed as the independent administrator for both estates. After this order, Individual M took steps to commence the process of selling the property including early engagement with real estate agents to obtain property appraisals and draft agency agreements. Individual M received a grant of the Letters of Administration. Individual M entered formal engagement with Real Estate Agents to sell the property. The property was placed on the market. Open inspections commenced. The property was sold at auction. The property was settled.

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

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. Application to your circumstances The reason for the delay in selling the property within 2 years of the deceased's death was due to Individual Z the child of the deceased not taking steps to administer the estate and the grandchildren of the estate assuming that Individual Z had inherited the property. No attempts were made to administer the deceased's estate until Individual Z passed away when it was found that both the deceased and Individual Z had died intestate. Complications then arose in relation to appointing an administrator which further delayed the sale. None of the above circumstances are out of the executor's control. 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 exercise the discretion to extend the 2-year time 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.