Private ruling: CGT - destroyed dwelling - deceased estate
Date of advice: 8 October 2025
Published: 1 December 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the discretion under subsection 118-195(1) of Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of the 2-year period for the disposal of a dwelling, available where the property is vacant land? | A1: No.

Relevant facts and circumstances: On XX/XX/20XX, the deceased passed away. At the time of their death, the deceased owned the property which they had acquired after 19 September 1985. The property was situated on less than 2 hectares of land and had been the main residence of the deceased prior to moving into a nursing home before their passing. The deceased did not own any other real estate and did not leave a will. Letters of Administration were granted to the deceased's adult children. From XX/XX/20XX to XX/XX/20XX the property was rented for an amount to cover rates, levies and maintenance, to a family friend who used it for storage. On XX/XX/20XX, the property was accidentally severely damaged by fire. The property was not insured. Having regard to engineers' reports it was determined that it was commercially unviable to restore the damaged dwelling and therefore it was subsequently demolished. The property was sold as vacant land during the 20XX-XX income year.

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

Reasons for decision: Summary: A capital gain or capital loss may be disregarded where a capital gains tax (CGT) event happens to a dwelling if you owned it as the trustee or beneficiary of a deceased estate. Where the deceased acquired their ownership interest in the dwelling after 20 September 1985, pursuant to the table in subsection 118-195(1) of the ITAA 1997, a CGT exemption may apply if it was their main residence at their date of death and not being used to produce income at that time. Note that the absence rule may be applied to meet the main residence requirement. The capital gain or loss is disregarded if the dwelling is disposed of within two years of the deceased's death, or a longer period allowed by the Commissioner. 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 outlines the factors that the Commissioner will take into consideration when deciding whether to exercise the discretion to extend the 2-year period. However, it is a requirement of section 118-195 of the ITAA 1997 that there is a capital gain or loss made from a CGT event that happens in relation to a dwelling . The provision does not apply to vacant land even if it previously contained a dwelling which was the deceased's main residence. There is no exception within section 118-195 of the ITAA 1997 which allows the discretion to be applied in situations where the dwelling has been destroyed. Therefore, the Commissioner cannot grant a longer period to sell the dwelling and disregard the capital gain or loss under section 118-195 of the ITAA 1997 as there is no dwelling.