Where a dwelling was used as the deceased’s main residence (but not for producing income) just before they died and disposed of within 2 years from the deceased’s date of death, any capital gains and capital losses triggered by the disposal are disregarded.

Where the disposal of the main residence was delayed, trustees and/or beneficiaries could apply for the Commissioner to extend the 2 year period.

Now, with the introduction of Practical Compliance Guideline 2019/5 on 27 June 2019, trustees and beneficiaries can assume that the 2 year period is extended for a further 18 months where all of the following circumstances apply:

  • There are extenuating circumstances outside of the trustee/beneficiary’s control that have taken time to address;
  • The main residence was listed for sale as soon as those extenuating circumstances were addressed;
  • The sale of the main residence settled within 12 months of being listed for sale;
  • There are extenuating circumstances inside the trustee/beneficiary’s control that have no material effect on the delay to dispose of the main residence; and
  • The trustee/beneficiary only require a further 18 months to dispose of the main residence.

Extenuating circumstances outside of the trustee/beneficiary’s control include:

  • Where a Will or ownership of the main residence is challenged;
  • Where a life interest is granted over the main residence;
  • Where the estate is especially complex to administer; and
  • Where a contract for sale of the main residence falls through for reasons outside of the trustee/beneficiary’s control.

They expressly do not include any voluntary inactivity on the part of the trustee/beneficiary.

If the trustee/beneficiary do not satisfy the safe harbour provisions, they can still apply to the Commissioner to exercise their discretion to extend the 2 year period. However, exercise of that discretion will continue to weigh up how much of the delay is due to circumstances outside of the trustee/beneficiary’s control.