Private ruling: Capital gains tax
Date of advice: 18 December 2025
Published: 9 February 2026
Ruling period: Year ending 30 June 20XX
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 (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 passed away a few years ago. The deceased lived at the property. The property was the deceased's main residence up until they passed away. The property was a pre-CGT asset. The deceased died with a valid will appointing the Trustee as executors of the deceased's estate. Probate was granted to the Trustee in the year following the date of death. The property was never used to produce assessable income. The property was less than 2 hectares in size. The deceased's sibling had moved in with them prior to their death to care for them and remained in the property after they passed away. The deceased sibling continued to live in the property until they passed away a couple of years after the deceased. The deceased's will did not give their sibling a right to reside in the property. The Trustee attempted to contact the deceased's sibling by letter and did not receive a response. A family friend advised the Trustee that the sibling was reclusive and would not respond to any correspondence. The Trustee became aware that the deceased's sibling had passed away a couple of years after the sibling's date of death. The Trustee prepared the house for sale a few months after they learned of the sibling's death. A contract was signed for the sale of the property shortly after it was placed on the market. Settlement took place in the month after the contract was signed.

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 reason for the delay in selling the property was due to the Trustee not administering the estate in a timely manner. The Trustee contacted the deceased's sibling via letter and did not hear anything. We have not been provided with details of further attempts made by the Trustee to sell the property until the sibling died, and the Trustee were made aware of their death a couple of years later. We acknowledge that once the sibling had ceased living in the property it was prepared for sale and sold in a timely manner. The sibling did not have a right to reside in the property under the will, and the property could have been sold at an earlier date. None of the above circumstances are out of the executor's control. In this regard, we consider that the delay was not outside your control. 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.