Private ruling: Deceased estate
Date of advice: 5 May 2026
Published: 20 July 2026
Ruling period: DD MM YYYY to DD MM YYYY
Date scheme commenced: DD MM YYYY

Ruling: Q1: Will the Main Residence Exemption (MRE) under Subdivision 118-B of the Income Tax Assessment Act 1997 (ITAA 1997) apply to the applicant's total ownership interest (xx% ownership interest) in a dwelling acquired by them from the deceased estate of their parent (Person 1) (xx% ownership interest) and subsequently their other parent (Person 2) (xx% ownership interest)? | A1: Yes | Q2: Will the Commissioner exercise the discretion with regard to subsection 118-195(1) of the ITAA 1997 to extend the two-year period to dispose of the applicant's interest in the inherited dwelling until final settlement as prescribed by Court Order (until DD MM YYYY) between the applicant and their sibling? | A2: 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 The Deceased, Person 1, an Australian citizen, was born on DD MM YYYY in XXX. The Deceased was married to Person 2, (the Deceased's spouse) an Australian citizen, who was born on DD MM YYYY in XXX. Person 1 and their spouse purchased a property at X (the Property) as joint tenants in YYYY for an unknown amount. Titles State have advised that the transfer document is no longer available. The Property was purchased in YYYY as joint tenants. The joint tenancy was severed on DD MM YYYY and from that time the Property was held by Person 1 and Person 2 as tenants in common in equal shares. Person 1 and their spouse had x children, Person 3 of XXX; Person 4 of XXX; and Person 5 (the applicant) of XXX. Person 1 died on DD MM YYYY, aged xx years, at XXX. The Deceased executed their Will on DD MM YYYY and appointed their spouse Person 2, and their 3 children as the Executors and Trustees of their Will. Upon Person 1 death, their child, Person 5 (the applicant) inherited half of the Deceased's xx% share in the Property (xx% of total) and Person 3 (the applicant's sibling) inherited half of the Deceased's xx% share in the Property (xx% of total). Therefore, following the death of the Person 1 on DD MM YYYY, the Property was owned by the Deceased's spouse, Person 2 (xx%), Person 3 (xx%) and Person 5 MMM (xx%). Person 2 continued to reside in the Property as their main residence until their death in YYYY. They executed their Will on DD MM YYYY and appointed their spouse, Person 1 (deceased at the time of their death), and 3 children as the Executors and Trustees of their Will. Person 2, died on DD MM YYYY, aged xx years, at XXX. Upon their death, Person 5 (the applicant) inherited half of Person 2 xx% share in the Property (xx% + xx% of total) and Person 3 (the applicant's sibling) inherited half of Person 2 xx% share in the Property (xx% + xx% of total). Therefore, as of DD MM YYYY, the applicant and their sibling, Person 3, inherited the balance of the Property in equal shares increasing each interest to xx% each of the Property. Person 2 died on DD MM YYYY. Since then, the Property has been continually occupied Person 3 as their principal place of residence. They have been the sole occupant. After that date, there followed extensive negotiations and Court proceedings regarding construction of the Will (of Person 2), applications made to the Court, and renouncement of one of the Executors. Administration of Estate Probate was originally granted by the Supreme Court of XXX on DD MM YYYY. Significant delays in the administration of the estate occurred following the grant of probate in MM YYYY due to Covid-19 restrictions. The applicant resides in XXX and was unable to travel to XXX to assist in the administration of the estate. Following this, there were many delays in the administration of the estate, which were caused by a number of complexities. There was uncertainty with regard to the construction of the Will and associated applications were made to the Supreme Court of XXX. Proceeding No. xxx was filed on DD MM YYYY. The issue was in respect to the construction of Clause x of the Will to confirm that the Deceased's interest passed to Person 3 and Person 5 in equal shares and that Person 4 had no entitlement to the property. On DD MM YYYY, judgment was given in the Supreme Court of XXX that the Deceased's interest in the property was intended to pass to Person 3 and Person 5 in equal shares. On DD MM YYYY, one of the Executors, Person 4, filed an application to the Supreme Court of XXX, that they wished to retire as an Executor of the estate. A new grant of probate was issued on DD MM YYYY. This caused significant delays in the administration of the estate. Person 3 made an application to the Supreme Court of XXX (Proceeding No. xxx) seeking orders for the betterment of their position, stating in their application that they wished adequate provision be made for their proper maintenance and support. This Application has been adjourned pending the outcome of settlement discussions and has not yet been determined. Person 3 suffered serious health issues which further caused delays in the estate's administration. Sale or Transfer of the Property The applicant, Person 5, and their sibling Person 3 have reached an in-principal agreement that Person 5 will transfer their xx% share of the Property to Person 3. This agreement requires a further Court Order to be issued, upon which, the transfer of the Property from Person 5 to Person 3 will take effect at a market value determined by an agreed Valuer. A valuation report for the Property was issued on DD MM YYYY. The report estimated the value of the Property to be $X. Person 5 anticipates transferring their xx% share in the property to Person 3 when a Binding Agreement is entered into between them. This Agreement has not yet been finalised and may not take place until the financial year commencing DD MM YYYY. A further Court Order will issue after agreement between Person 3 and Person 5 has been finalised. At no time from the purchase of the Property in YYYY, until now, was any rental income or other income derived from the Property. Information provided You have provided a number of documents containing detailed information in relation to the applicant's Administrative Discretion application, including: • Administrative Discretion Application, dated DD MM YYYY • response to further questions provided DD MM YYYY We have referred to the relevant information within these documents in applying the relevant tests to your circumstances. Assumptions Not applicable.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10(5) | Income Tax Assessment Act 1997 section 108-7 | Income Tax Assessment Act 1997 section 118-100 | Income Tax Assessment Act 1997 subsection 118-130(3) | Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 subsection 128-20(1) 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. | Detailed Reasoning - Question 1:: The Main Residence Exemption (MRE) under Subdivision 118-Bof the ITAA 1997 will apply to the applicant's total ownership interest (xx% ownership interest, together with their sibling's xx% ownership interest) in a dwelling acquired by them from the deceased estate of their Person 1 (xx% ownership interest) and subsequently their Person 2 (xx% ownership interest). | Detailed Reasoning - Question 2:: The Commissioner will exercise the discretion under subsection 118-195(1) of the ITAA 1997 to allow an extension to the 2-year period to dispose of the applicant's interest in the inherited dwelling until final settlement as prescribed by Court Order (DD MM YYYY) between the applicant and their sibling. | Detailed Reasoning - Subsection 104-10(5) ITAA 1997: Subsection 104-10(5) of the ITAA 1997 outlines that a capital gain or capital loss you make is disregarded if you acquired the asset before 20 September 1985. | Detailed Reasoning - Section 118-100 ITAA 1997: This section describes what Subdivision 118-B is about, as follows: You can ignore a capital gain or capital loss you make from a CGT event that happens to a dwelling that is your main residence. However, this exemption may not apply if you are a foreign resident, and may not apply in full if: • it was your main residence during part only of your ownership period; or • it was used for the purpose of producing assessable income. | Detailed Reasoning - Section 118-197 ITAA 1997: Section 118-197 of the ITAA 1997 outlines special rules for surviving joint tenants, as follows: This Subdivision applies to you as if the ownership interest of another individual in a dwelling had passed to you as a beneficiary in a deceased estate if: (a) you and the other individual owned ownership interests in the dwelling as joint tenants; and (b) the other individual dies. | Detailed Reasoning - Subsection 118-195(1) ITAA 1997: Subsection 118-195 of the ITAA 1995 outlines that 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: From the time the deceased died, the property was used only as the main residence of at least one of the following people: • 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 | Detailed Reasoning - Subsection 108-7 ITAA 1997: Subsection 108-7 of the ITAA 1997 outlines that individuals who own a CGT asset as joint tenants are treated as if they each owned a separate CGT asset constituted by an equal interest in the asset and as if each of them held that interest as a tenant in common. | Detailed Reasoning - Section 118-100 ITAA 1997: Section 118-100 of the ITAA 1997 outlines that you can ignore a capital gain or capital loss you make from a CGT event that happens to a dwelling that is your main residence. | Detailed Reasoning - Subsection 118-195(1) ITAA 1997: 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 - And also, one of these items: 1 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 your ownership interest ends within 2 years of the deceased's death, or within a longer period allowed by the Commissioner 2 the deceased acquired the ownership interest before 20 September 1985 the dwelling was, from the deceased's death until your ownership interest ends, the main residence of one or more of: (a) the spouse of the deceased immediately before the death (except a spouse who was living permanently separately and apart from the deceased); or (b) an individual who had a right to occupy the dwelling under the deceased's will; or (c) if the CGT event was brought about by the individual to whom the ownership interest passed as a beneficiary-that individual | Detailed Reasoning - Section 118-130 ITAA 1997: 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. 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 - Practical Compliance Guideline PCG 2019/5: 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. 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. 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. 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. 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: 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. As set out in subsection 118-195 of the ITAA 1995, 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: From the time the deceased died, the property was used only as the main residence of at least one of the following people: • 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 In this matter, the Deceased, Person 1, acquired the Property in YYYY with their spouse, Person 2, as joint tenants. As per Item 2 in Column 2 as set out in subsection 118-195(1) of the ITAA 1997, the Deceased acquired the ownership interest before20 September 1985, and the Property was the Deceased's main residence just before the Deceased's death. Following their death, the Property was the main residence of Person 2 until the time of their death in YYYY. The Deceased passed away on DD MM YYYY. Person 2 continued to reside in the Property as their main residence until their death on DD MM YYYY. Following the death of the Person 2, the Property continued to be the main residence of Person 3, as set out in the Person 2's will (as a person who has a right to occupy the property under the deceased's will). The Property was not then being used for the purpose of producing assessable income. The statutory two-year exemption period to dispose of the Property, which was set to expire on DD MM YYYY (2 years following the death of the Person 2), proved insufficient. The challenges encountered were beyond the control of the beneficiaries and Executors and delayed the completion of necessary estate administration tasks and the sale or transfer of the Property. As per Item 1 in Column 3 as set out in subsection 118-195(1) of the ITAA 1997, the beneficiaries' ownership interest in the Property ends within 2 years of the Deceased's death, or within a longer period allowed by the Commissioner. In this case, the primary reasons for the delay in disposal of the Property were problems with the administration of the estate, which were caused by a number of complexities. There was uncertainty with regard to the construction of the Will and associated applications were made to the Supreme Court of XXX. There were further delays due to Covid-19 restrictions, which prevented travel to the Property to expedite finalisation of its sale or transfer. Further, Person 3's serious health issues and treatment further caused delays in the estate's administration. Further, having considered all the relevant facts, including the amount of time regarding issues with the administration of the Will, the applications made to Court, and administrative delays due to Covid-19 restrictions, the Commissioner will apply the discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension to the 2-year time limit until DD MM YYYY. | Detailed Reasoning - Question 1:: The Main Residence Exemption (MRE) under Subdivision 118-Bof the ITAA 1997 will apply to the applicant's total ownership interest (xx% ownership interest, together with their sibling's xx% ownership interest) in a dwelling acquired by their from the deceased estate of Person 1 (xx% ownership interest) and subsequently Person 2 (xx% ownership interest). | Detailed Reasoning - Question 2:: The Commissioner will exercise the discretion under subsection 118-195(1) of the ITAA 1997 to allow an extension to the 2-year period to dispose of the applicant's interest in the inherited dwelling until final settlement as prescribed by Court Order (DD MM YYYY) between the applicant and their sibling.

ATO view documents: 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.