Private ruling: Capital gains tax 2-year discretion
Date of advice: 31 March 2026
Published: 9 June 2026
Ruling period: XX XXXXX 20XX
Date scheme commenced: XX XXXXX 20XX

Ruling: Q1: Will the Commissioner exercise the discretion under section 18-195 of the Income Tax Assessment Act 1997 (ITAA 1997) to allow an extension of time for you to dispose of your ownership interest in the dwelling and disregard the capital gain or loss you made on the disposal? | A1: No.

Relevant facts and circumstances: Background information The deceased passed away on XX XXXXX 20XX. The deceased purchased the property as a block of land prior to 20 September 1985. A house was built on the property at a later date, prior to 20 September 1985. The property is less than 2 hectares. The property was not rented out or used to produce assessable income at any time. On XX XXXX 20XX the deceased created and signed their Last Will and Testament. The deceased lived in the property until they moved into alternative accommodation. The property continued to be treated as the deceased's main residence for capital gains tax (CGT) purposes. After the deceased moved into the alternative accommodation, the property was occupied by a relative, except when they were overseas for short periods of time. The property was not classified as the main residence, for CGT purposes, by a beneficiary under the Will. No one had a right to occupy the property under the Will. In the Will, it was the deceased's heartfelt wish that the property remain in the family for as long as possible, and that relatives reside at the property. The Will named the executor of the estate as a different relative. The beneficiaries of the estate were the deceased's children. Following the deceased's death, the executor commenced administration of their estate for distribution to the beneficiaries. Soon after the deceased's passing, Child A was diagnosed with a serious medical condition. Child A, passed away in Country A. Due to Child A's passing their share of the deceased's estate, now formed a part of their estate. Letters of Administration for Child A's estate The application for Grant of Probate for the deceased was required to be amended, with the beneficiaries now being Child B (XX%) and the estate of the Late Child A (XX%). Child A died intestate; therefore, Letters of Administration were required to administer their estate. Delays occurred in gaining the Letters of Administration because they passed away overseas. The deceased's estate and sale of the property Given the complexity and interdependence of the two estates, the deceased's beneficiaries did not wish to list the property for sale until the estate of the Child A had been lodged with the X Court. The diverse nature and complexity of assets for the deceased, required detailed information from multiple sources. On XX XXXXX 20XX, Grant of Probate for the deceased, was granted. On XX XXXXX 20XX, in anticipation of the Letters of Administration for the estate of Child A, the executor of the estate of the deceased entered into an agency agreement for the sale of the property with Real Estate A. On XX XXXXX 20XX, the agency agreement was finalised and signed. On XX XXXXX 20XX, Letters of Administration were granted for Child A. The initial Contract of Sale provided for a XX-month settlement period, to allow property development potential. During the marketing campaign the executor's office received requests for amendments to the contract, with each proposed purchaser seeking an extended settlement period. In order to maximise competition at auction and attract additional bidders the beneficiaries unanimously agreed to extend the settlement period. On XX XXXXX 20XX, the property sold at auction. A substantial period of time later the property settlement occurred.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 118-195 | Income Tax Assessment Act 1997 section 118-145

Reasons for decision: 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 the property as trustee 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 property sale settled 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 Capital gains tax and deceased estates - the Commissioners discretion to extend the 2-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 17 of 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 applying this to your circumstances, we acknowledge that due to events that occurred after the deceased, passed away, the passing of the deceased's Child A and beneficiary to their estate, the fact that the beneficiary died intestate and overseas, and with some of the beneficiaries being overseas residents, it is understandable that you felt it difficult to sell the property during this period. You felt that you were unable to sell the property until all the paperwork was completed in relation to the estate of the beneficiary. This was complicated by the fact they passed away overseas. Grant of Probate for the deceased was granted XX XXXXX 20XX. With Letters of Administration granted for the beneficiary on XX XXXXX 20XX. The property was advertised for sale from XX XXXXX 20XX and sold at auction on XX XXXXX 20XX. Settlement occurred on XX XXXXX 20XX, therefore not within XX months of the property being listed for sale. Initially the Contract of Sale provided for a XX-month settlement period, including special conditions permitting the purchaser to lodge development applications reflecting the property development potential. In order to maximise the competition at auction and attract additional bidders the beneficiaries unanimously agreed to a XX-month settlement period. It is understandable why you would make this choice in order to maximise the sale price. However, it nevertheless was a choice rather than a matter outside of your control. Therefore, a significant part of the delay in disposing of the property was not a matter outside of your control and was due to an extended settlement period, this is not a reason the Commissioner can accept to allow an extension of time in selling 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. [Note: The 50% CGT discount is available if Australian tax resident legal personal representative or beneficiary disposes of their ownership interest in the dwelling acquired from the deceased estate; If there are any foreign residents who disposed of their ownership interest (i.e., trustee or beneficiary) they will need to consider the CGT discount entitlement.]