Private ruling: Commissioner's discretion - deceased estate
Date of advice: 6 January 2026
Published: 2 March 2026
Ruling period: Year ended 3 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: Person A (the deceased) passed away on DD MM 20YY. The dwelling is located at the property. The deceased owned the property jointly with their spouse. Their spouse passed away on DD MM 20YY. The property was not used to produce income and was the deceased's main residence from the date of purchase until their death. The property is situated on less than 2 hectares of land. The deceased left a Will dated DD MM 19YY. The Will states the following: I appoint Person B of... to be the Executor of my Will and Trustee of my estate. However, if they predeceases me or is unwilling to act then I appoint Person C of... to be the Executor of my Will and Trustee of my estate in their place. Probate was granted on DD MM 20YY to Person B. Person B was residing at the property at the time of the deceased's death and continued to reside at the property until after the XX Tribunal (XX) made an order appointing State Trustees Limited as their administrator on DD MM 20YY. You had not been in contact with the deceased or Person B for many years. In 20YY, you engaged Company A (your solicitors) due to concerns regarding the delay in the administration of the estate. Between 20YY and late 20YY your solicitors sent numerous letters and emails to Company B seeking information in relation to the administration of the deceased's estate including the sale of the property. During 20YY and 20YY, your solicitors entered negotiations and drafted documents in relation to various proposals regarding finalising the estate and the sale of the property. In March 20YY, you were informed by Company B that they had concerns as to whether Person B had lost the capacity to make decisions regarding the estate. In July 20YY, you were informed by Company B that they were awaiting medical reports as to whether Person B had a medical condition and that it may be necessary for an administration order application to be made to XX Tribunal and for advice to be obtained from a barrister in relation to a potential claim for further provision out of the estate. On DD MM 20YY, a medical practitioner signed a XX Tribunal Medical Report in which they stated that Person B had been suffering from a medical condition since approximately 20YY. On DD MM 20YY, the State Trustee was appointed as administrator of Person B's financial affairs by order of the XX Tribunal. On DD MM 20YY, the State Trustee was appointed guardian for Person B, with the power to make decisions about their living arrangements, support services and the exercising of any rights or actions the State Trustee order. After the State Trustee was appointed as Person B's administrator you made requests for the State Trustee to consent to the removal of Person B as executor and trustee of the deceased's estate and for an application to be made to the Supreme Court of XXX for you to be appointed as administrator and trustee of the estate. On DD MM 20YY, the Supreme Court of XXX ordered Person B's removal as executor and appointed you as administrator of the estate. Following your appointment as the executor of the estate arrangements were made for the property to be prepared for sale. At some point after Person B vacated the property squatters began residing in the property. The squatters caused the proposed auction date to be postponed on X occasions and further delays were caused as the property required additional cleaning before it could be put on the market for sale. You entered into a contract to sell the property on DD MM 20YY with settlement occurring on DD MM 20YY.

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. 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 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. | Detailed Reasoning - Applicable to your circumstances: We acknowledge that Person B, the original executor of the Will, was suffering with a medical condition which was evident from around 20YY with a diagnosis in 20YY. These conditions are progressive in nature. Despite their diagnosis, Person B was able to contact a solicitor and successfully obtain probate. During this period, they continued to reside in the property, care for a pet, and maintain the property with some assistance from their family member. In 20YY, Person B's family member sought a XX Tribunal order to obtain guardianship of Person B's personal affairs. This order included medical advice confirming that Person B's illnesses had progressed to a stage requiring additional support regarding their finances due to the worsening of their condition. The State Trustee were ultimately appointed guardian and administrator of their personal and financial matters on DD MM 20YY. We also considered that there is no evidence of any substantive action being taken during the first four years of the administration. While we acknowledge the factors outlined above, it was within your control to seek advice from a solicitor or contact a family member much earlier regarding your entitlements as a beneficiary. This lack of proactive engagement is a relevant consideration when assessing the overall circumstances and the reasonableness of the delay. 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 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.