Private ruling: CGT - deceased estates
Date of advice: 3 June 2026
Published: 17 August 2026
Ruling period: Year ending 30 June 20YY
Date scheme commenced: DD MM 20YY

Ruling: Q1: Will the Commissioner exercise his discretion under section118-195 of the Income Tax Assessment Act 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: Sometime between DD MM 19YY and DD MM 19YY, the property comprising a single title duplex known as X and XA was acquired by Person A, Person B, Person C and Person D as tenants in common in equal shares. Each individual held a 25% undivided interest in the property. From the time of acquisition, the duplex comprised two dwellings: • Dwelling X was occupied by Person A and Person B • Dwelling XA was occupied by Person C and Person D The property was not subdivided, and each owner retained a 25% interest in the property. Each couple treated the dwelling they occupied as their main residence. In DD MM 19YY, Person C passed away and their 25% interest passed to Person D, resulting in Person D holding a 50% interest in the property. From DD MM 20YY, Person D permanently moved into residential aged care. Despite vacating the dwelling, they retained their ownership interest and did not lease the property at that time. On DD MM 20YY, Person A passed away. Their 25% interest in the property passed to Person B. The estate was not administered immediately, and the title was not updated. On DD MM 20YY, Person B passed away. Their interest in the property passed to you, Person E and Person F. On DD MM 20YY, probate was granted for the estate of Person A, and on DD MM 20YY, probate was granted for the estate of Person B. On DD MM 20YY, Person D passed away. Under their will, their 50% interest in the property passed to you, who was appointed executor. Between DD MM 20YY and DD MM 20YY, a Deed of Family Arrangement was negotiated and finalised in relation to the estate of Person B, under which: • one beneficiary (Beneficiary B) received a cash settlement, and • You and Beneficiary A retained the remaining interest in the property. On DD MM 20YY, probate was granted for the estate of Person D. From DD MM 20YY, the property began to be used to produce assessable income: • Dwelling X was leased on a periodic tenancy • Dwelling XA was leased on fixed-term arrangements On DD MM 20YY, applications were lodged to transmit the property to you as executor. On DD MM 20YY, the title was registered in your name as executor of the estates. On DD MM 20YY, discussions commenced with a real estate agent regarding a potential sale following lease expiry. From DD MM 20YY, Dwelling XA was first rented following the death of Person D. On DD MM 20YY, an application was made to transfer the title into the names of: • You (75%) • Beneficiary A (25%) Delays in processing occurred due to: • statutory timeframes for potential estate challenges, • complexity of multiple estates, • unresolved prior title issues, and • verification of the Deed of Family Arrangement. On DD MM 20YY, further sale discussions commenced. In DD MM 20YY, a previous short-term lease expired, and a new 12-month lease was entered into for Dwelling XA, being a conscious decision made after the transfer application had been lodged more than 6 months prior. On DD MM 20YY, a new Certificate of Title was issued recording ownership as: • You - 75% • Beneficiary A - 25% On DD MM 20YY, a contract was entered into to sell the property. On DD MM 20YY, settlement of the sale occurred.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 section 110-25 | Income Tax Assessment Act 1997 Subdivision 115-A | Income Tax Assessment Act 1997 section 115-25 | Income Tax Assessment Act 1997 section 116-20 | Income Tax Assessment Act 1997 Section 118-145 | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 section 128 | Income Tax Assessment Act 1997 section 128-15

Reasons for decision: Detailed Reasoning - Ownership interests in property: Capital gains tax consequences depend on the nature and extent of the ownership interest held in a CGT asset. Where land is held as tenants in common, each co-owner holds an undivided fractional interest in the whole of the property, rather than an interest in any specific part of it. For the purposes of Part 3-1 of the ITAA 1997, including the operation of the main residence exemption in Subdivision 118-B, each owner's interest in the property must therefore be considered as an interest in the entirety of the land and improvements. | Detailed Reasoning - Legislative framework: Section 118-195 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a capital gain or capital loss made by a trustee or beneficiary from a CGT event happening to a dwelling acquired from a deceased estate to be disregarded if: • the deceased acquired the ownership interest before 20 September 1985, and • the trustee's or beneficiary's ownership interest ends within two years of the deceased's death, or within a longer period allowed by the Commissioner. The Commissioner has discretion to extend the two-year period under subsection 118-195(1) of the ITAA 1997. | Detailed Reasoning - Discretion to extend the two-year period: The Commissioner's approach to this discretion is outlined in the practical compliance guideline PCG 2019/5, which explains that the discretion is generally exercised where the delay in disposal arises from circumstances outside the control of the trustee or beneficiary, including (but not limited to): • disputes concerning ownership of the dwelling or the validity of the will • delays caused by the complexity of administering the deceased estate • unexpected delays or failures in settlement beyond the taxpayer's control • restrictions on real estate activity imposed by government authorities. PCG 2019/5 also identifies factors that weigh against the exercise of discretion, including: • waiting for more favourable market conditions • delaying disposal for convenience • periods of inactivity that cannot be adequately explained. PCG 2019/5 also states that any period the dwelling was used to produce assessable income may be a factor relevant to the exercise of the Commissioner's discretion. Each case is determined on its individual facts, with the causes of the delay being more significant than the length of the delay. Where the discretion under section 118-195 of the ITAA 1997 has not been exercised, the capital gain or capital loss arising on disposal of the property is not disregarded. | Detailed Reasoning - Partial main residence exemption for different dwellings held under one title: Taxation Determination TD 1999/69 Income tax: capital gains: can the term 'dwelling' as defined in section 118-115 of the Income Tax Assessment Act 1997 include more than one unit of accommodation? (TD 1999/69) confirms that the term 'dwelling' as defined in section 118-115 of the ITAA 1997 can include more than one unit of accommodation where the units of accommodation are used together as one place of residence or abode. Whether two or more units of accommodation are used together as one place of residence or abode for the purposes of the definition of 'dwelling' is a question of fact that depends on the particular circumstances of each case. Paragraph 4 of TD 1999/69 provides the following factors as relevant in considering whether multiple units of accommodation may be considered one residence or abode: a) whether the occupants sleep at and live in them; b) the distance between and the proximity of the units of accommodation; c) whether the units are connected; d) whether the units are capable of being sold separately; e) the extent to which the daily activities of the occupants in the units are integrated; f) how the units are shared by the occupants; and how the costs of the units are shared by the occupants. Where two dwellings are occupied and maintained independently of each other by different individuals or family units they will not be considered one residence and the main residence exemption will not apply to the proportion of the capital gain attributable to the dwelling in which the individual did not reside, and the land area upon which that dwelling sits. In these cases a partial main residence exemption will apply to the dwelling which was the main residence of the individual and its adjacent land. The Taxation Determination TD 1999/67 Income tax: capital gains: if your land (including land on which your dwelling is situated) exceeds 2 hectares, can you select which 2 hectares the main residence exemption in Subdivision 118-B applies to and, if so, how do you calculate any capital gain or capital loss you make on the remainder of your land? provides guidance on how you calculate any capital gain or capital loss you make on the remaining portion of the property not covered by the exemption. | Detailed Reasoning - CGT discount: Section 115-25 of the ITAA 1997 provides that an individual or trust, including a deceased estate, may apply the 50% CGT discount to a capital gain if the CGT asset was held for at least 12 months before the relevant CGT event. Where a CGT asset passes through a deceased estate the trustee or beneficiary is taken to have acquired the asset on the deceased's date of death for the purposes of the 12-month holding rule. The period is measured from that date to the contract date of disposal. | Detailed Reasoning - Applicable to your circumstances: The property was acquired between 19YY and 196YY by Persons A and B and Person C and D as tenants in common in equal shares, with each individual holding a 25% undivided interest in the property. Although a duplex was constructed and each couple occupied a separate dwelling as their main residence, no subdivision occurred and ownership interests were not legally altered. Persons A, B and D each held pre-CGT ownership interests in the property, and Person D also held a post-CGT interest acquired on the death of Person C in 19YY. Probate for the relevant estates was obtained by MM 20YY, and the Deed of Family Arrangement, finalised on DD MM 20YY, resolved the entitlement of the beneficiaries. The Commissioner accepts that the administration of multiple estates, the execution of the Deed of Family Arrangement, and the need to resolve ownership complexities contributed to initial delays, which are factors consistent with those outlined in Practical Compliance Guideline PCG 2019/5 as potentially supporting the exercise of the discretion. However, as probate for all estates had been obtained by DD MM 20YY and the Deed of Family Arrangement had been finalised by mid-MM 20YY, and the title had been transferred into your name as executor by MM 20YY, the estates had progressed to a point where the property could have been administered and sold by you in your capacity as executor within the two year period. Accordingly, while these matters explain some delay, they do not account for the continued delay beyond that period. Following the grant of probate, you held the property as legal personal representative of the deceased estates. Under Division 128 of the ITAA 1997, you were taken to have acquired the relevant ownership interests and had the authority to deal with estate assets, including disposal. The wills of Person A and B provided that the property formed part of the estate to be distributed to beneficiaries but did not require that the property be transferred into the names of beneficiaries prior to sale. As executor, you were able to sell the property directly and distribute the net proceeds to the beneficiaries in accordance with their entitlements under the wills and the Deed of Family Arrangement. The decision to transfer the property into your name and Beneficiary A's name prior to sale was therefore not required and introduced additional administrative processes which contributed to delays that were within your control. Consistent with PCG 2019/5, delays arising from such decisions weigh against the exercise of the Commissioner's discretion. The Commissioner acknowledges that delays were also encountered in processing the title through Landgate. Applications were lodged in MM 20YY and MM 20YY, and Landgate undertook detailed verification of multiple estates, the Deed of Family Arrangement and title irregularities, with the certificate of title ultimately issued on DD MM 20YY. These matters are accepted as contributing to administrative delays outside your direct control. However, as the transfer of the property into beneficiary names was not a necessary precondition to sale, and you had the ability to dispose of the property as executor during this period, the delay in disposal cannot be attributed solely to Landgate processing times. Accordingly, while these delays are acknowledged, they are not considered to be the primary cause of the delay for the purposes of subsection 118-195(1) of the ITAA 1997. From MM 20YY, the property was used to produce assessable income through leasing arrangements. In MM 20YY, you applied to transfer the title to the beneficiaries, and by MM 20YY the lease for dwelling XA had expired. At that time, you made a conscious and informed decision to enter into a new 12-month fixed-term lease for that dwelling. The Commissioner considers that this decision was made more than six months after the application to transfer title, and was not compelled by external circumstances, and contributed to delaying the disposal of the property. While tenancy laws impose certain constraints, the property was ultimately sold while tenanted, demonstrating that the existence of tenants did not prevent a sale. The decision to enter into a long-term lease, rather than maintaining flexibility to dispose of the property as soon as practicable after the title had been transferred, was within your control. Consistent with PCG 2019/5, the use of the property to derive assessable income and the decision to defer sale through leasing arrangements are factors that weigh against the exercise of the discretion. Having regard to all the circumstances and the principles outlined in PCG 2019/5, the Commissioner considers that although initial delays arose from estate administration, the Deed of Family Arrangement and Landgate processing, the ongoing delay in disposing of the property was materially influenced by decisions made by you as executor. These include the decision to transfer the property to beneficiaries prior to sale where this was not required, and the decision to enter into a long-term lease after MM 20YY. These factors are not considered to be outside your control and therefore weigh against the exercise of the discretion under subsection 118-195(1) of the ITAA 1997. Accordingly, the Commissioner is not satisfied that the delay in disposing of the property was primarily due to circumstances beyond your control, and the discretion will not be exercised. For completeness, capital gains tax consequences must be determined separately for each ownership interest in the property, as required under Parts 3-1 and 3-3 of the ITAA 1997. The interests acquired from the estates of Person A (25%, date of death DD MM 20YY), Person B (25%, date of death DD MM 20YY), and Person D's original 25% interest (date of death DD MM 20YY) are taken to have been acquired at their respective dates of death at market value in accordance with section 128-15 of the ITAA 1997. As these interests were not disposed of within two years of the relevant dates and the Commissioner has not exercised the discretion, any capital gain arising between the date of death and the date of sale is assessable. Person D's additional 25% interest, acquired on the death of Person C in 19YY, is a post-CGT interest. While this interest may benefit from the absence rule in section 118-145 of the ITAA 1997 and be treated as their main residence until their death, it extended to the entire undivided property, including the dwelling not occupied by themselves. Accordingly, only a partial main residence exemption is available under Subdivision 118-B, and a portion of the capital gain remains taxable. The method of apportionment must be reasonable and is guided by Taxation Determination TD 1999/67. The capital proceeds from the disposal, being the contract price less incidental costs under section 116-20 of the ITAA 1997, must be apportioned across each ownership interest. The cost base for each interest is determined separately and includes the market value at the relevant date of acquisition together with allowable incidental costs. Each capital gain is calculated individually before applying any exemptions and concessions. As the property was disposed of more than 12 months after each relevant acquisition date, the 50% CGT discount under Subdivision 115-A of the ITAA 1997 may apply to any remaining net capital gain.

Additional Relevant Facts: The property comprised a single title duplex, preventing individual disposal of the dwellings. The land area was less than X. | Each dwelling was the main residence of its respective occupants prior to their deaths. Following the death of Person B, no beneficiary occupied the property as a main residence. | The property was not disposed of within two years due to: | • the structure of ownership, | • the need to await the death of Person D, | • statutory waiting periods, | • Land title processing delays, and | No capital improvements were made prior to sale, and the property was sold as is.