Estate CGT - Main Residence – grief

The executor decides to sell the deceased’s home. However, as they have been grieving the loss of their loved one, three years have gone by. What is the capital gains tax position for the executor?

Generally, the executor has two years to sell the deceased’s home and still be entitled to the favourable CGT rules for main residences.

If it is sold outside this time frame, capital gains is calculated on the change in the market value from the date of death to the date sold.

However, the ATO Commissioner has a discretion that he can exercise to allow the main residence exemption to apply after the two years, if there are circumstances beyond the control of the executor that prevented them selling the property earlier. In his Practical Compliance Guide (PCG 2019/5) he lists those circumstances that he considers relevant.

• the ownership of the dwelling, or the will, is challenged,
• a life tenancy 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 the executor’s control.

Factors that he considers would weigh against the granting of the discretion include:

• waiting for the property market to pick up before selling the home,
• delay due to refurbishment of the house to improve the sale price,
• inconvenience on the part of the trustee or beneficiary to organise the sale of the house, or
• unexplained periods of inactivity by the executor in attending to the administration of the estate.

Although when this legislation was passed Parliament considered that the two year grace period was required due to factors including grief, in a recent private binding ruling, the ATO did not consider grief was sufficient to extend the two year period.

If you need assistance with any of your estate tax requirements or to determine if there are any estate tax issues, please contact us.