Private ruling: Commissioner's discretion - deceased estate
Date of advice: 16 March 2026
Published: 4 May 2026
Ruling period: Year ended 30 June 20YY | Year ended 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: The deceased passed away on DD MM 20YY. The dwelling is located at XXX (the property). The deceased acquired the property before 20 September 1985. The property was the main residence of the deceased just before they passed away. The property was situated on less than two hectares of land. The deceased left a Will dated DD MM 20YY. The Will lists multiple items bequeathed to multiple beneficiaries. The deceased revised their Will dated DD MM 20YY. The Will states the following: I appoint my friends X and X as my executors and trustees ('my executors', which includes my personal representatives and trustees for the time being). ... to bequeath the property located at XXX, to give X thousand dollars and cover any fees involved with the transition of ownership process from the residue of my estate to X if he survives me for the many years of assistance, he has given me and the administration of my estate. ... XX thousand dollars to be put towards repairs including plumbing, electrical and structural defects to pass building inspections for the property. On DD MM 20YY, executors XX and XX renounced their right and title to the probate and execution of the Will. On DD MM 20YY, you received a letter from lawyers stating they have concluded that they do not have the resources to handle the file work that may be required in the administration of the estate. On DD MM 20YY, you made initial contact with XX (solicitors) to facilitate the probate requirements. From MM - MM 20YY, you carried out domestic duties, searching existing documents to locate beneficiaries contact details. On DD MM 20YY, the probate application was lodged. On DD MM 20YY, probate was granted. On DD MM 20YY, you began clearing the property, itemising the bequeathed items listed in the Will. On DD MM 20YY, the beneficiaries that had been located received their bequeathed items. On DD MM 20YY, the property was transferred to you as the executor. From this time, it has been used as a storage unit until the remaining beneficiaries are located to bequeath the remaining items to. On DD MM 20YY, you were diagnosed with a medical condition and have been traveling a long distance for treatment. The property has not yet been listed for sale because it's currently being used to store the deceased personal belongings.

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

Reasons for decision: Summary: Section 118-195 of the ITAA 1997 disregards capital gains and capital losses made from certain CGT events that happen in relation to a dwelling that: • was a deceased person's main residence and was not being used to produce assessable income just before they died, or • was acquired by the deceased before 20 September 1985. If you dispose of an ownership interest in a dwelling that passed to you as an individual beneficiary or as the trustee of the deceased's estate within 2 years of the deceased's death, any capital gain or loss you make on the disposal is disregarded. 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. After the deceased passed away, you owned the property as beneficiary of the estate. The property was the deceased's main residence until just before they passed away and was not used to produce assessable income at that time. The property sale will settle 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 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. In your case, we considered the following factors, having regard to paragraphs 3 and 17 of PCG 2019/5. Additional executors named in the Will renounced their right to probate on DD MM 20YY. As a result, you became solely responsible for administering the estate. This contributed to some delay in progressing estate matters. On DD MM 20YY, the lawyers you initially contacted advised that they could not act due to limited resources. Between MM and MM 20YY, you spent time locating and confirming beneficiary contact details. As the beneficiaries were not related to the deceased, additional time was required to identify the correct individuals. Bequeathed items were distributed on DD MM 20YY. This was part of your duties as executor and contributed to the time taken to clear the property. After the property was transferred to you on DD MM 20YY, it continued to be used to store the deceased's personal items that were still awaiting distribution. The presence of the deceased's personal items at the property limited the extent to which it could be prepared for sale. You were diagnosed with a medical condition on DD MM 20YY and were required to travel a significant distance for treatment. While this reduced your capacity to attend to estate administration tasks, the diagnosis occurred toward the end of the two-year period. As a result, it had limited impact on the actions taken during the earlier part of that period. We also considered the following matters in line with paragraph 14 of PCG 2019/5. Although probate was granted on DD MM 20YY, no steps were taken to obtain valuations, contact a real estate agent, arrange repairs, or otherwise prepare the property for sale before the two-year period ended. After probate, much of the delay related to the ongoing clearing of the property and the continued storage of items at the dwelling. No alternative arrangements were made to allow the property to be prepared for sale, and there is no evidence that tasks were progressed at the same time as estate administration activities. The property was transferred to you on DD MM 20YY, around X months after probate was granted. While some delay relates to the administration of the estate, further steps could reasonably have been taken earlier to progress the sale. There is no evidence that steps were taken to speed up the process or to ensure the property could be sold within the two-year period. 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. The cost of repairs can also be included in the cost base of the property. You are also entitled to the 50% CGT discount in relation to the property.