Private ruling: Deceased estates - capital gains tax - cost base
Date of advice: 13 February 2026
Published: 30 March 2026
Ruling period: Year ended 30 June 20YY
Date scheme commenced: DD MM 20YY

Ruling: Q1: Is the cost base in your hands, for the 50% ownership interest in the Property that the deceased acquired after 20 September 1985, the deceased's cost base at the time of their death? | A1: Yes.

Relevant facts and circumstances: Prior to 20 September 1985 Person A and Person B purchased a property which is larger than two hectares. Sometime after 20 September 1985, Person A and Person B signed a Deed which outlined the history of their relationship, that their relationship had irretrievably broken down and their agreement regarding the final settlement of all financial and property matters between them (the Deed). On DD MM 19YY in accordance with the terms of the deed, Person A's share in the Property was transferred to Person B. Person B made payment to Person A of $X! as per the deed. Person B then became the sole registered proprietor, now with two ownership interests; a 50% interest that they acquired on DD MM 19YY (Pre-interest), and a 50% interest they acquired from Person A on DD MM 19YY (Post- interest). Person A lived in the house on the Property as their main residence up until their death on DD MM 20YY (The Deceased). There were, no major capital improvements made to the Property since acquisition. On DD MM 20YY, the Property was sold within the Deceased's Estate.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 128-15(2) | Income Tax Assessment Act 1997 subsection 128-15(4) | Income Tax Assessment Act 1997 section 126-5

Reasons for decision: Summary: All future legislative references are to the Income Tax Assessment Act 1997 (ITAA 1997) unless otherwise stated. The capital gains tax (CGT) provisions apply to any change of ownership of a CGT asset, unless the asset was acquired before 20 September 1985. Division 128 provides legislation on the application of the CGT provisions when a person passes away and a CGT asset, they owned just prior to them dying devolves to their legal personal representative (LPR), or passes to a beneficiary of the deceased estate. A LPR includes an executor or administrator of an estate of an individual who has died. If you acquire an asset owned by a deceased person as their LPR or beneficiary, you are taken to have acquired the asset on the day the person died under subsection 128-15(2). There are special rules relating to the first element of cost base of CGT assets acquired from a deceased person; these are outlined in subsection 128-15(4) of the ITAA 1997. The table in subsection 128-15(4) shows modifications to the cost base and reduced cost base. For an asset that the deceased acquired prior to 20 September 1985 (pre-CGT assets) the first element of the asset's cost base is the market value on the date the deceased died (item 4 of the table in subsection 128-15(4)). For an asset that the deceased acquired on or after 20 September 1985 (post-CGT assets), the first element of the asset's cost base is the cost base of the asset on the day the deceased died (item 1 of the table in subsection 128-15(4)). Taxation Determination TD 2000/31 discusses the capital gains treatment of interests in CGT assets that were acquired at different times. TD 2000/31 provides that the interests remain separate CGT assets for capital gains tax purposes and that when a CGT event such as CGT event A1 (about the disposal of CGT assets) occurs, the following applies; (a) there is a separate date of acquisition for each interest; (b) there is a separate cost base for each interest; and (c) capital proceeds are determined separately for each interest. Main residence Subdivision 118-B of the Income Tax Assessment Act 1997 allows for concessional treatment to be given to a dwelling that was owned by a deceased person if the executors of the deceased person's estate sell that dwelling within two years of the date of death. Any capital gain or capital loss made on the sale of such a dwelling is disregarded if the dwelling was: • Acquired by the deceased before 20 September 1985, or • The deceased's main residence when they died. Taxation Determination TD 1999/67 discusses how to apply the main residence exemption when your land exceeds two hectares. TD 1999/67 explains that you can apply the main residence exemption to whichever area of land you choose in addition to the land on which your dwelling is situated. However, subsection 118-120(2) specifies that the total of the land (including the land on which the dwelling is situated) must not exceed two hectares. Any land that exceeds two hectares will be subject to capital gains tax provisions. Marriage breakdown rollover Marriage or relationship breakdown roll-over relief as provided by s 126-5 and 126-15 in Subdivision 126-A is potentially available when certain CGT events happen involving asset transfers between spouses or former spouses, or between a company or trustee and a spouse or former spouse. An individual's "spouse" is defined in s 995-1(1) to include: • another individual (whether of the same sex or a different sex) with whom the individual is in a relationship that is registered under a state law or territory law prescribed for the purposes of the Acts Interpretation Act 1901 s 22B as a kind of relationship prescribed for the purposes of that section, and • another individual who, although not legally married to the individual, lives with the individual on a genuine domestic basis in a relationship as a couple. The types of relationships that are prescribed under the Acts Interpretation Act s 22B are relationships that can be registered under some state and territory laws that provide for registration of certain relationships. Only state and territory laws or provisions of laws that provide for registration of relationships - same-sex or opposite-sex - will be prescribed. The reference to "a State law, Territory law or foreign law" in Subdivision 126-A is confined to statutory law of a state, territory or foreign country. It does not extend to the law generally in a state, territory or foreign country. This means that a CGT event which happens because of a court order relating to de facto relationship breakdown only qualifies for roll-over if it happens because of a court order made under the statutory law of a state, territory or foreign country relating to de facto relationship breakdowns. This is also supported by the explanatory memorandum to the Taxation Laws Amendment Bill (No 2) 1992 which states that roll-over will extend to "the transfer of assets on the breakdown of de facto marriages where a State, Territory or foreign country has legislated to allow the court to order such a transfer" ( Taxation Determination TD 1999/61). Roll-over is, therefore, only available in those States, Territories and foreign countries that have made specific legislative provision for de facto marriage breakdowns. De facto relationships were formally recognised in State A in Australia with the XX Act 19XX which came into operation on DD MM 19YY. Application to your situation Person A and Person B separated in MM 19YY. As there was no specific legislation for de facto marriage breakdowns at the time Person A and Person B separated, the marriage breakdown rollover was not available to them. This means Person B acquired the 50% interest from Person A at the time of their separation, and not at the time Person A first acquired it in 19YY. Therefore, at the time of their death, Person B (the Deceased) owned two separate assets for CGT purpose; a 50% ownership interest in the Property acquired prior to 1985 (pre-interest), and a 50% ownership interest in the Property that they acquired when they separated from Person A in MM 19YY (Post-interest). As this date is after 20 September 1985, the first element of the cost base for the 50% Post-interest in the Property in your hands, will be the Deceased's cost base on the date of the Deceased's death. Note: You will choose which two hectares that the main residence exemption will apply to in line with the principles and restrictions outlined in Taxation Determination TD 1999/67 .