Private ruling: Capital gains tax
Date of advice: 15 April 2026
Published: 13 July 2026
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 1 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 ownership interest in the property and disregard the capital gain made on the disposal? | A1: No.

Relevant facts and circumstances: The deceased died intestate a number of years ago. The property was purchased by the deceased and their late spouse. The property was in the sole name of the deceased after their spouse passed away. The property was the deceased's main residence just before they passed away. The property was less than X hectares in size. The property was never used to produce assessable income. The relatives wrote to the local Council, where the property is situated, to report the circumstances of the estate; however, no response was received for a number of months, at which time they were informed by the council that managing the estate was their responsibility. The relatives sought authority from the Court to administer the estate but were unsuccessful due to lacking legal standing under the Administration Act. The relatives subsequently contacted another relative living overseas, who declined to administer the estate. The Public Trustee was approached by the relatives to act as administrator, and they agreed to administer the estate. Letters of Administration were granted. The property was transferred to the Trustee as Executor. Survivorships were registered as these had not been completed at the time of the deceased's spouse's death. As part of the estate administration, the Trustee engaged a contractor for a formal genealogical investigation. During this time various parentage searches were conducted with nil results. The COVID19 lockdowns and difficulties obtaining birth certificates led to significant delays in creating a complete family tree. The final genealogy report was issued but remains under review by the Trustees legal office due to ongoing issues in establishing proof of entitlement. To date, no beneficiaries have been confirmed. The property remained vacant from the date of the deceased passing away until it was sold. In preparation for sale of the property, the Trustee obtained a valuation. Market appraisals from real estate listing agents were also obtained. These appraisals identified the need for significant repairs, prior to listing the property for sale. Only some works were conducted, and the property was sold as is. Settlement was completed several years after the date of death.

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

Reasons for decision: Summary: The 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 a capital gains tax (CGT) event that happens to a dwelling that is their main residence. If a taxpayer inherits an ownership interest, subsection 118-195(1) of the ITAA 1997 applies so that any capital gain or capital loss they make from a CGT event that happens in relation to a dwelling or their ownership interest in a dwelling is disregarded if: • They are an individual and the interest passed to them as a beneficiary in a deceased estate, or they owned it as the trustee of a deceased estate; and • The deceased acquired the ownership interest on or after 20 September 1985 and the dwelling was the deceased's main residence just before the deceased's death, and was not then being used for the purpose of producing assessable income; and • Their ownership interest ends within two years of the deceased's death, or within a longer period allowed by the Commissioner. Where the deceased acquired the property prior to 20 September 1985, the dwelling was from the deceased death until your ownership interest ends the main residence of one of the following: • the spouse of the deceased immediately before their death (but not a spouse who was permanently separated from the deceased) • a person who has a right to occupy the property under the deceased's will • you, as a beneficiary, if you dispose of the property as a beneficiary. 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 two-year period (for example, the taxpayer or a family member has a severe 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. • Property used to earn assessable income. • Unexplained periods of inactivity by the executor 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. | Detailed Reasoning - Application to your circumstances: The property took several years to sell. The relatives of the deceased wrote to the local Council to let them know that the deceased had passed. They made no follow up on this correspondence and received a reply from the City Council a couple years after contacting them to let them know that it had nothing to do with them and that they were not responsible to administer the estate. The relatives attempted to obtain Letters of Administration without success. The relatives took several years to approach the Public Trustee to administer the estate. Although the Public Trustee agreed to administer the estate it took a few years to sell the property. The property was not sold within a timely manner even when the Public Trustee took over the estate administration. In this regard, we consider that the delay was not outside your control once the Public Trustee commenced the administration. It is for the above reasons that you do not meet the requirements for the Commissioner to extend the 2-year time as the property could have been sold at an earlier stage. The Commissioner will not be exercising his discretion to extend the 2-year period for you to dispose of the Property. Therefore, 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. Australian tax residents are entitled to the 50% CGT discount in relation to the property.