Private ruling: Commissioner's discretion - deceased estate
Date of advice: 10 September 2025
Published: 3 November 2025
Ruling period: 20XX-XX income year
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 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: Persona A (The deceased) passed away on XX XXXX 20XX The deceased's main residence property situated at Address A. Person A had 50% interest on the property. The property was originally acquired by Person A and Person B on XX XXXX 19XX and the land size of the property was approximated 728 sqm (Less than 2 hectares). The beneficiaries of the estate are: Person C, Person D, Person E, Person F, Person G, Person H, Person I and Person J. After Person A's death, all beneficiaries met and discussed Person A's wishes and agreed to allow Person C and Person K x years rent free, to get back on their feet. To achieve this outcome, the beneficiaries signed a deed of family arrangement dated 12th December 20YY stating at clause 1: The parties agree to vary the terms of the Will to allow Person C to remain at the property for x years from the date of death, subject to them maintaining the property in good order and condition and to pay all rates, taxes and insurance on the property and upon the expiration of the xx-year period, the property is to be prepared for sale and sold within the xx year and settlement to occur strictly before XX XXX 20XX. Person C shall be allowed to remain in occupation of the property up until settlement. Person C was the carer for Person A and Person B until their deaths. Person C received the carer's pension which ceased once the deceased had passed away resulting in having no sources of income or funds in savings. During the first xx months after the deceased's death, Person C was receiving emotional support from the government through counselling services and was not fit to seek out or undertake employment. During the xx year Person C was able to gain financial independence and take the necessary steps in preparation for the sale of the property in the xx year as stipulated in the deed of family arrangement. The property was prepared for sale on XX XXXX 20XX The property was listed for sale online on XX XXXX 20XX The contract of sale was dated XX XXXX 20XX and the property settled on XX XXXX 20XX.

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

Reasons for decision: Summary: The Commissioner will not exercise the discretion under section 118-195 of the Income Tax Assessment Act 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. | 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 19 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 after 19 September 1985. After the deceased passed away, you owned the property as trustee of the estate (or if the legal title passed to beneficiary, update the sentence to: 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 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 14 of PCG 2019/5 explains we weigh up all of the factors (both favourable and adverse). Paragraph 17of 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 the dwelling was settled more than two years after the deceased's death with settlement occurring on X XX 20XX. A significant reason for the delay was due to deed of arrangement signed by all parties agreeing for Person C and Person K to live in the dwelling for xx years rent free to get back on their feet. We understand that you and beneficiaries wanted to provide additional time for Person C and Person K to get back on their feet and recover from being the deceased and their spouse's primary carer since 20YY. 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. Refer to that provision for details.