Private ruling: Capital gains tax - deceased estate
Date of advice: 30 October 2025
Published: 15 December 2025
Ruling period: XX XXX 20XX
Date scheme commenced: XX XXX 20XX

Ruling: Q1: Will the Commissioner exercise the discretion under section 118-195 of the Income Tax Assessment Act 1997 to allow an extension of time for you to dispose of your ownership interest in the dwelling and disregard the capital gain or capital loss you made on the disposal? | A1: No.

Relevant facts and circumstances: Your parent A passed away on XX XXX 20XX You inherited 50% of your parents's residence at Address A, which was their primary residence of over 15 years The property is less than 2 hectares, purchased after 1985 and has a house on it. You wanted to sell the property however your sibling, Person A expressed interest to acquire your share in the property. Your child has been living on the property as a caretaker as the property is isolated and you were worried about people entering the property stealing or vandalising. You have been trying over a year to sell to your sibling but is yet to commit to the acquisition. You have taken the following steps to sell your portion of the property to your sibling: • XX XXX 20XX - Visited their accountant to get information on tax implications. • XX XXX 20XX - Emailed your sibling asking for them to buy your share out, making suggestions for how payment could be made. No response was received to this. • XX XXX 20XX - Had your parent B email the solicitor on your tax implications. • XX XXX 20XX - Emailed to my sibling from my parent trying to help them buy the property - No response. • XX XXX 20XX - Had your parent B email your sibling demanding them to purchase the property while you were admitted to Wollongong hospital with health issues. No response was received. • XX XXX 20XX - Had your parent B contact the solicitor to work out the sale with your sibling. • XX XXX 20XX - Emailed to the solicitor to sort it out the sale with sibling. - No response. • XX XXX 20XX - Your parent B visited your sibling in X to discuss a settlement but no action taken by them. • XX XXX 20XX - Emailed to the solicitor asking to get in touch with my sibling. A deed of loan has been drawn up between you and your sibling, yet to be signed On XX XXX 20XX you advised that you expect the property to be settled in XXX 20XX.

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

Reasons for decision: Summary: The Commissioner will not exercise the discretion under section 118-195 of the Income Tax Assessment Act 1997 to allow an extension of time for you to dispose of your ownership interest in the dwelling and disregard the capital gain or capital loss you made on the disposal | 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 it as the trustee or beneficiary of the deceased estate. For a dwelling acquired by the deceased after 19 September 1985, 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 two years of the deceased's death. Your ownership interest ends at the time of settlement of the contract of sale. In your case, the deceased acquired the property after 19 September 1985. After the deceased passed away, you owned 50% of the property as beneficiary of the estate. The property was the deceased's main residence until just before they passed away and was not used to produce assessable income at that time. The sale of your ownership interest of the property is expected to settle more than two years after the deceased's death. Therefore, you require the Commissioner's discretion to extend the two-year period to be eligible for an exemption. 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 two years. Paragraph 14 of PCG 2019/5 explains we weigh up all of the factors (both favourable and adverse). Paragraph 17of 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 there was no circumstances under paragraph 12 of PCG 2019/5 that we consider have delayed the sale. The fact that your sibling's lack of commitment to proceed with the sale and this will result in CGT liability is not a factor the Commissioner considers beyond their control. You did not change the course in attempting to sell the property to a third party or act requiring your sibling to purchase your share of the property. There is no evidence suggesting that you took actions or considered alternatives to sell the property. 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. Refer to that provision for details.