Private ruling: CGT - deceased estate
Date of advice: 21 October 2025
Published: 8 December 2025
Ruling period: DD MM YYYY to DD MM YYYY
Date scheme commenced: DD MM YYYY

Ruling: Q1: Does section 118-195 of the Income Tax Assessment Act 1997 ('ITAA 1997') operate to disregard the capital gain in its entirety derived from the disposal of a residential property by the Executors of the deceased party's estate? | A1: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect, and you cannot rely on it. The fact sheet has more information about relying on your private ruling. Background information 1. The applicant for this private ruling is the Trustee for the estate of the deceased ('the Trustee'). 2. The deceased was born on DD MM YYYY in XXX and passed away on DD MM YYYY. 3. At the time of his death, the deceased owned a residential property. 4. The property was acquired by the deceased on DD MM YYYY as vacant land. 5. The approximate price paid for the vacant land was $xyz (excluding incidental costs of purchase). 6. A dwelling was subsequently constructed on the vacant land and the property became the main residence of the deceased in MM YYYY. The approximate cost of the construction of the dwelling was $xyz. 7. The property continued to be the main residence of the deceased until he relocated to an aged care "serviced apartment" in MM YYYY and subsequently a high-level aged care facility in MM YYYY, until his death in MM YYYY. 8. The property remained vacant during the period when the deceased moved into an aged care facility in MM YYYY and the time of his death in MM YYYY. 9. The property remained fully furnished during this period with all of the goods and chattels belonging to the deceased. With the assistance of family members, the deceased visited the property periodically during this period. 10. A property agent was formally appointed on DD MM YYYY to market the property for sale. 11. The property was subsequently disposed of by the Executors of the deceased on DD MM YYYY (contract date). The settlement date was DD MM YYYY. 12. The property was sold for $xyz to an unrelated third party. 13. At no time during the entire ownership period of the asset was the property used to generate assessable income. 14. The deceased was a resident of Australia for income tax purposes for the entire ownership period of the property. Information provided 15. You have provided a number of documents containing detailed information in relation to the Trustee's private ruling application, including: • Private Binding Ruling ('PBR') Application, dated DD MM YYYY • Response to further questions provided, dated DD MM YYYY 16. We have referred to the relevant information within these documents in applying the relevant tests to your circumstances. Assumption(s) Not applicable.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-130 | Income Tax Assessment Act 1997 section 118-145 | Income Tax Assessment Act 1997 section 118-195 Further issues for you to consider | Not applicable.

Reasons for decision: Summary: All legislative references are to the Income Tax Assessment Act 1997 ('ITAA 1997') unless otherwise stated. Section 118-195 of the Income Tax Assessment Act 1997 operates to disregard the capital gain in its entirety derived from the disposal of a residential property by the Executors of the deceased party's estate. | Detailed Reasoning - Subsection 118-195(1) ITAA 1997: 17. Subsection 118-195(1) of the ITAA 1997 outlines the following with regard to a dwelling acquired from a deceased estate: (1) A capital gain or capital loss you make from a CGT event that happens in relation to a dwelling or your ownership interest in it is disregarded if: (a) you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate; and (b) at least one of the items in column 2 and at least one of the items in column 3 of the table below are satisfied; and (c) the deceased was not an excluded foreign resident just before the deceased's death. | Detailed Reasoning - Section 118-130 ITAA 1997: 18. Subsection 118-130(1) of the ITAA 1997 defines ownership interest in a dwelling as having a legal interest of the dwelling until it ends on settlement of the property. 19. Subsection 118-130(3) of the ITAA 1997 provides that where the sale or other disposal of the dwelling proceeds under a contract, the ownership interest ends at the time of settlement of the contract of sale and not at the time of entering the contract, as follows: (3) For land or a dwelling where you have a contract for the happening of the *CGT event, you have an ownership interest in it until your legal ownership of it ends. | Detailed Reasoning - Section 118-145 ITAA 1997: 20. Section 118-145 of the ITAA 1997 outlines absences from the main residence, as follows: (1) If a dwelling that was your main residence ceases to be your main residence, you may choose to continue to treat it as your main residence. (2) If you use the part of the dwelling that was your main residence for the purpose of producing assessable income, the maximum period that you can treat it as your main residence under this section while you use it for that purpose is 6 years. You are entitled to another maximum period of 6 years each time the dwelling again becomes and ceases to be your main residence. (3) If you do not use the dwelling for that purpose, you can treat it as your main residence under this section indefinitely. (3A) This section does not apply if the dwelling was your main residence because of section 118-147 and ceases to be your main residence because of subsections 118-147(3) and (4). (4) If you make the choice, you cannot treat any other dwelling as your main residence while you apply this section, except if section 118-140 (about changing main residences) applies. 21. Section 118-145 of the ITAA 1997 therefore allows the deceased to continue to treat the dwelling as his main residence, notwithstanding his move into residential aged care in March 2020. | Detailed Reasoning - Practical Compliance Guideline PCG 2019/5: 22. Paragraph 1 of Practical Compliance Guideline PCG 2019/5 The Commissioner's discretion to extend the 2-year period to dispose of dwellings acquired from a deceased estate , states that section 118-195 of the ITAA 1997 disregards capital gains and capital losses made from certain CGT events that happen in relation to a dwelling that was a deceased person's main residence and not being used to produce assessable income just before they died, or was acquired by the deceased before 20 September 1985. 23. Paragraph 2 of PCG 2019/5 states that if you disposeof an ownership interest in a dwelling that passed to you as an individual beneficiary or as the trustee of the deceased's estate within 2 years of the deceased's death, any capital gain or loss you make on the disposal is disregarded. The Commissioner has the discretion to extend the 2-year period. 24. Paragraph 3 of PCG 2019/5 states that, generally, we will allow a longer period where the dwelling could not be sold and settled within 2 years of the deceased's death due to reasons beyond your control that existed for a significant portion of the first 2 years. 25. Paragraph 12 of PCG 2019/5 outlines the circumstances that take more than 12 months to resolve, which will be considered by the Commissioner: • the ownership of the dwelling, or the will, is challenged • a life or other equitable interest given in the will delays the disposal of the dwelling • the complexity of the deceased estate delays the completion of administration of the estate, or • settlement of the contract of sale of the dwelling is delayed or falls through for reasons outside of your control. 26. Paragraph 15 states that factors that would weigh in favour of the Commissioner allowing a longer period include those listed in paragraph 12 of PCG 2019/5 above. The absence of some or all of those favourable factors does not necessarily preclude us from allowing a longer period. | Detailed Reasoning - Application to your circumstances: 27. Considering the provisions of subsection 118-195(1) of the ITAA 1997, a capital gain or capital loss you make from a CGT event that happens in relation to a dwelling or your ownership interest in it is disregarded if: a) you are an individual and the interest passed to you as a beneficiary in a deceased estate, or you owned it as the trustee of a deceased estate, and b) at least one of the items in column 2 and at least one of the items in column 3 of the table (see previous section) are satisfied, and c) the deceased was not an excluded foreign resident just before the deceased's death. 28. In this matter, the deceased acquired his initial interest in the property on DD MM YYYY as vacant land. A dwelling was subsequently constructed on the vacant land and the property became the main residence of the deceased in MM YYYY. 29. As per Item 1 in Column 2 in subsection 118-195(1) of the ITAA 1997, the deceased acquired his initial interest in the property 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. 30. The deceased passed away on DD MM YYYY, and the property passed to the Trustees of his estate. 31. The Trustee listed the Property for sale on DD MM YYYY. The property was sold on DD MM YYYY (contract date) for $xyz to an unrelated third party. The settlement date was DD MM YYYY. 32. The property was disposed of well within 2 years of the deceased's death. 33. As per Item 1 in Column 3 in subsection 118-195(1) of the ITAA 1997, the Trustee's ownership interest ends within 2 years of the deceased's death. 34. Having considered all the relevant facts, section 118-195 of the ITAA 1997 does not operate to disregard the capital gain in its entirety, derived from the disposal of a residential property by the Executors of the deceased party's estate. | Detailed Reasoning - Conclusion: Section 118-195 of the Income Tax Assessment Act 1997 operates to disregard the capital gain in its entirety derived from the disposal of a residential property by the Executors of the deceased party's estate.