Private ruling: Commissioner discretion - extension of time
Date of advice: 20 August 2025
Published: 27 October 2025
Ruling period: Year ended 30 June 20YY
Date scheme commenced: 01 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 property and disregard the capital gain made on the disposal? | A1: No.

Relevant facts and circumstances: The deceased passed away in the early 2000s. The deceased's spouse passed away prior to the deceased. The deceased lived at the property with their child. The property was purchased by the deceased prior to 1985. The property was less than 2 hectares in size. The property was the deceased main residence just before they passed away. The property was never used to produce assessable income. The deceased's Will was unsigned and undated. Letters of Administration were granted in a recent year. The deceased's child was the sole beneficiary of the estate. The deceased's child remained living in the property until they moved out and went into care a couple of years ago. The deceased child was under an Order for financial administration by the Public Trustee which was granted a couple of years ago. The Public Trustee commenced their involvement in administering the estate after they found out that the estate of the deceased had not been administered and they needed to apply for probate in order to sell the property. The property was placed on the market in MM 20YY. The Public Trustee sold the property in the month after putting the property on the market, with settlement a month later.

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

Reasons for decision: Summary: The general 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 selling their main residence that they own. In relation to a deceased's former main residence, section 118-195 of the ITAA 1997 may provide an exemption where it is disposed of within 2 years of the deceased's death by the trustee of the deceased estate, or a beneficiary of the deceased estate after title to the dwelling is transferred to the beneficiary. The application of the provision varies depending on whether it is sold by the trustee or the beneficiary. In this case the deceased's former main residence was sold by the trustee. Where a trustee of a deceased estate disposes of the deceased's former main residence outside of the 2-year time period, the exemption will still apply if an extension of time is granted or during the period from the deceased's death to the date of disposal, the dwelling was the main residence of either: • the deceased's spouse, or • an individual who had a right to occupy the dwelling under the deceased's will. In this case the deceased's spouse had predeceased them and as they died without a valid Will, no individual had a right to occupy the dwelling under a Will. Therefore, the trustee will require the Commissioner to exercise the discretion to allow an extension of time to dispose of the dwelling. The discretion is discussed in Practical Compliance Guideline PCG 2019/5 Capital gains tax and deceased estates - the Commissioner's discretion to extend the 2-year period to dispose of dwellings acquired from a deceased estate . It states that 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 2-year period (for example, the taxpayer or a family member has a several 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. • Waiting for refurbishment of the dwelling to improve the sale price. • The property was used to earn assessable income. • Unexplained periods of inactivity 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. In this case, the major cause of the initial period of the delay was due to the deceased passing away without a valid Will and his child living in the property without a right to reside in the property. The child lived in the property for a number of years after the deceased had passed. After the child went into care and the Public Trustee taking over the child's financial management the Public Trustee found that the property was still in the name of the deceased and the deceased had passed away without a valid Will. The Public Trustee took over a few years ago. Letters of administration were granted a couple of years ago. While the Public Trustee acted in a timely manner to sell the property once they commenced the administration of the estate, it took a number of years for the administration to commence which is well outside the 2-year time period allowed under the legislation for the sale of a deceased's main residence. The delay in the sale was the failure of the deceased's child to administer the estate or seek assistance in administering the estate. The Commissioner will not exercise the discretion to extend the 2-year time period prescribed in section 118-195 of the ITAA 1997 because the significant period of delay in selling the property was due to deceased's estate not being administered until the Public Trustee commenced the administration of the estate many years after the deceased died. As the Commissioner is not exercising the discretion to extend the 2-year period to dispose of the property, 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. However, the 50% CGT discount will apply in relation to the property.