Private ruling: Capital gains tax
Date of advice: 25 September 2025
Published: 24 November 2025
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 01 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 property and disregard the capital gain made on the disposal? | A1: No.

Relevant facts and circumstances: The deceased passed away a number of years ago. The deceased lived at the property as their main residence just before they passed away. The property was the deceased's main residence for the whole of their ownership period. The property was less than 2 hectares in size. The property was never used to produce assessable income. The property was purchased prior to the introduction of CGT in September 1985. The deceased passed away intestate. Letters of Administration were granted to the Public Trustee in a previous year. Prior to the Public Trustee taking over the administration of the Estate the deceased's child was administrating the Estate up until a few years ago when their mental capacity diminished and a Guardianship order was issued. The property was available to the deceased's family members for their use. One of the deceased's children occupied the property up until their death. Another of the deceased's children moved in after the first children passed away and remained there up until they went into care. The deceased's grandchildren presumed ownership, moved into the property, and remained there until the Public Trustee had them removed and took vacant possession. No steps were taken by any of the deceased family members, from the deceased's death, up until the Public Trustee took over the administration of the Estate. The property was sold by the Public Trustee.

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

Reasons for decision: Summary: The general 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 selling their main residence that they own. In relation to a deceased's former main residence, section 118-195 of the ITAA 1997 may provide an exemption where it is disposed of within 2 years of the deceased's death by the trustee of the deceased estate, or a beneficiary of the deceased estate after title to the dwelling is transferred to the beneficiary. The application of the provision varies depending on whether it is sold by the trustee or the beneficiary. In this case the deceased's former main residence was sold by the trustee. Where a trustee of a deceased estate disposes of the deceased's former main residence outside of the 2-year time period, the exemption will still apply if an extension of time is granted or during the period from the deceased's death to the date of disposal, the dwelling was the main residence of either: • the deceased's spouse, or • an individual who had a right to occupy the dwelling under the deceased's will. In this case the deceased's died without a will, no individual had a right to occupy the dwelling under a will. Therefore, the trustee will require the Commissioner to exercise the discretion to allow an extension of time to dispose of the dwelling. The discretion is discussed in 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 . It states that 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 2-year period (for example, the taxpayer or a family member has a several 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. • Waiting for refurbishment of the dwelling to improve the sale price. • The property was used to earn assessable income. • Unexplained periods of inactivity 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. In this case, the major cause of the initial period of the delay was due to the deceased passing away without a valid Will and their children and grandchildren living in the property without a right to reside in the property. The deceased's family members lived in the property for a number of years after the deceased had passed. While the Public Trustee acted in a timely manner to sell the property once they commenced the administration of the estate, it took some years for the administration to commence which is well outside the 2-year time period allowed under the legislation for the sale of a deceased's main residence. The delay in the sale was the failure of the deceased's child to administer the estate or seek assistance in administering the estate. The Commissioner will not exercise the discretion to extend the 2-year time period prescribed in section 118-195 of the ITAA 1997 because the significant period of delay in selling the property was due to the deceased's estate not being administered until the Public Trustee commenced the administration of the estate, many years after the deceased died. As the Commissioner is not exercising the discretion to extend the 2-year period to dispose of the property, 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. However, the 50% CGT discount will apply in relation to the property.