Private ruling: Deceased estate
Date of advice: 14 May 2026
Published: 27 July 2026
Ruling period: Year ended DD MM 20YY
Date scheme commenced: DD MM 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 for you to dispose of your ownership interest in the property and disregard the capital gain or capital loss you made on the disposal? | A1: No.

Relevant facts and circumstances: On the DD MM 20YY the deceased entered a nursing home. The deceased passed away on DD MM 20YY. You provided a copy of the will date DD MM 20YY which states: Information supplied Probate was granted DD MM 20YY. The deceased owned a property. Property was less than X. The deceased acquired ownership of the property in 19YY. The dwelling was the main residence of the deceased just before the deceased's death. The property was not used for the purpose of producing assessable income. The grandchildren of the deceased occupied the property from 20YY to 20YY. The grandchildren did not have a right to reside in the property under the will. It was the deceased's wish to let the grandchild to live there. The trustee allowed the grandchild to reside in the property. Repairs were carried out on the property from MM 20YY to MM 20YY. On DD MM 20YY the title of the property was transferred into the name of Executor. You provided a copy of the title deed in the name of the executor. Property was sold the Executor of the Estate. On DD MM 20YY the beneficiary was diagnosed with XX. You provided copies of a letters detailing the beneficiary's treatment. The beneficiary had only visited the deceased once in Y years. The executor, spouse of the beneficiary, did not enter into any formal caring arrangements for the beneficiary. The executor could not talk to the beneficiary about the estate as this caused panic and anxiety for the beneficiary. The beneficiary was happy for the grandchildren to live in the property. An exclusive selling agency agreement for the property was signed on DD MM 20XX. The contract date was the DD MM 20YY. The settlement date for the property was DD MM 20YY.

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

Reasons for decision: Summary: The Commissioner will not exercise their discretion under section 118-195 of the Income Tax Assessment Act 1997 to extend the period until DD MM 20YY for disposal as you have not met the relevant criteria for an extension. | 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 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 19YY, 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 X years of the deceased's death. Your ownership interest ends at the time of settlement of the contract of sale. 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 X 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 consider as favourable factors that the property was used as the deceased's main residence and was not used for income producing purposes. We also considered the many other events that occurred from the time of the deceased's death until the property was sold. These included the beneficiary's personal health issues. We acknowledge the sensitivity of the personal family circumstances including your caring responsibilities. You have been unable to provide an explanation of how the unforeseen or serious personal circumstances contributed to being unable to attend to the deceased estate. Consequently, unforeseen or serious personal circumstances could not be classified as exceptional circumstances preventing finalisation of the estate. We considered the use of the dwelling for the whole of the period from the date of the deceased's death until settlement of the sale of the dwelling when determining whether or not to exercise the Commissioner's discretion. You have not identified any other factors that prevented you from selling the property whilst the grandchildren who did not have a right to reside under the will lived in the property until MM 20YY. PCG 2019/5 also outlines factors that would weigh against the Commissioner allowing a longer period. Some factors include inconvenience on the part of the trustee or beneficiary to organise the sale of the dwelling or unexplained periods of inactivity by the executor in attending to the administration of the estate. Draft Taxation Determination TD 2026/ D1 Income tax: deceased estates - meaning of 'right to occupy the dwelling under the deceased's will' in item 2(b) of column 3 of the table in subsection 118-195(1) of the Income Tax Assessment Act 1997 states: 15. In light of the statutory context in which the words 'under the deceased's will' are found in section 118-195, and consistent with the reasoning adopted in case law, item 2(b) is limited to circumstances where a right to occupy has been expressly granted under the terms of the will to an individual specifically named in the will. 16. An individual will only have a right to occupy a dwelling under the deceased's will if this right was granted in accordance with the terms of the will itself 'without the aid or intervention of any subsequent or intermediate transaction'. 17. A right to occupy granted to an individual by a trustee pursuant to a broad discretion, given to the executor or trustee of the deceased estate under the deceased's will, is not 'a right to occupy the dwelling under the deceased's will' for the purposes of subsection 118-195(1). Comparisons can be made between your circumstances, and the circumstances set out in TD 2026/D1, as in your case, the grandchildren did not have a right to occupy the dwelling under the Will. The grandchildren resided in the house because the trustee agreed. This could be considered as a dominant reason for the delay in the sale of the dwelling. It was a choice to allow the grandchildren to live in the property and not a circumstance outside of your control causing the delay to the sale of the property. We also considered the information and documentation provided does not support that the deceased estate was of a complex nature and hence there were no factors to suggest that there would be a delay in completing the administration of the estate. 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.