The law at present allows a period of grace to sell a deceased’s main residence without there being any CGT consequences in relation to the disposal. The period of grace is 2 years from the date of the death of the deceased.

An exposure draft has been issued that proposes to give the Commissioner of Taxation a discretion to extend this 2 year period. The Explanatory Memorandum (EM) indicates that, although the following examples are not exhaustive, the Commissioner would be expected to exercise discretion in situations where:

  • the ownership of a dwelling or a will is challenged 
  • the complexity of a deceased estate delays the completion of the administration of the estate
  • a trustee or beneficiary is unable to attend to the deceased estate due to unforeseen or serious personal circumstances arising during the 2 year period. Examples include the taxpayer or a family member having a severe illness or injury
  • settlement of a contract of sale over the dwelling is unexpectedly delayed or falls through for circumstances outside the beneficiary or trustee‘s control

The EM also indicates that in exercising this discretion, the Commissioner is expected to consider whether and to what extent the dwelling is used to produce assessable income and the period that the trustee or beneficiary held the ownership interest in the dwelling.

The amendments will operate retrospectively and will apply in relation to CGT events that happen in and from the 2008-09 income year. Also the time limit on amendment to income tax returns will not apply so that taxpayers can seek the exercise of the Commissioner’s discretion as if the law had been in force at the time.