Extending the Deceased Estate CGT Main Residence Exemption – New Safe Harbour Rules

Capital gains tax (CGT) is a tax payable when you sell an asset for a profit.

Fortunately, it does not apply to your family home. This exemption also applies if you have died, provided that the home is sold and settled by your executors within 2 years. 

But what if there is a delay with the estate? For example, if there is litigation such that the home cannot be sold in that time?  Up to now, it was “bad luck” – whilst the Commissioner does have some discretion, it was generally the case that CGT would be payable (although at a reduced rate).

Recently, however, the Commissioner has provided a Practical Compliance Guideline (PCG 2019/5), which provides a useful guide to executors, beneficiaries and their advisors. The benefit of this guideline is that now, if certain conditions are met, the executor or beneficiary can rely on an additional 18-month period. This means there could effectively be a 3.5 year exemption period. 

The guideline sets out that the beneficiary can rely on this period for situations where for example, there has been a challenge to the estate, or the deceased’s will contained a life interest that delayed the disposal of the property. Another example would be if the property sold, but settlement was never completed through no fault of the executor or beneficiary.

Importantly, the guideline sets out certain delays which would not qualify for the extended concessionary period including:

  1. Waiting for the property market to improve before selling;
  2. Refurbishing the property to improve the sale price;
  3. The executor or beneficiary’s inconvenience in organising the sale of the property; or
  4. Unexplained inactivity by the executor in administering the estate.

If the executor or beneficiary meets all the conditions in the guideline, they must keep records evidencing this compliance.  

The Commissioner’s discretion still exists to consider other factors which may have caused delay to the disposal of the property.

Next steps

To find out whether your situation qualifies for the extended concessionary period, and for clarity about what your obligations are, please do not hesitate to contact us.