A New Capital Gains Tax ‘Safe Harbour’ for Executors or Beneficiaries Experiencing Delays in Selling an Inherited Property

The Australian Tax Office (ATO) has recently issued guidelines that could be of relevance for executors or beneficiaries who have been having suffering delays in selling a deceased’s main residence.

Generally speaking, Capital Gains Tax (CGT) is not payable on the sale of a person’s main residence. The sale of a deceased’s home will not attract CGT if it is completed within two years of the deceased’s death. However, this may not always be possible. The new guidelines provide a ‘safe harbour’ for executors and beneficiaries wishing to utilise the tax exemption but where factors are delaying the sale within the applicable time limit.

The Commissioner of Taxation has always had the discretion to extend this period where the delay is out of the control of the executor or beneficiary. Previously, it was necessary to apply to the Commissioner asking for the exercise of the discretion. However, the guidance outlines the factors that the ATO consider when deciding whether to exercise discretion. Providing the executor or beneficiary complies with guideline rules, they can manage any CGT position as if the Commissioner had agreed to extend the two-year limit by a further eighteen months.

To demonstrate compliance, it will be important to keep detailed records, including the reasons causing the delay in making the disposal.

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