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  • Extensions to the 2-year ownership period

    If disposal of an inherited property is delayed by exceptional circumstances outside your control, the 2-year limit on the capital gains tax (CGT) exemption can be extended.

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    When the exemption applies

    An inherited property is exempt from CGT if you dispose of it within 2 years of the deceased's death, and either:

    • the deceased acquired the property before September 1985
    • at the time of death, the property was the main residence of the deceased and was not being used to produce income.

    Extending the 2-year limit

    The 2-year limit is extended if disposal of the property is delayed by exceptional circumstances outside your control.

    You do not have to apply for the extension. It is automatically granted if you satisfy all of the following 5 conditions:

    • during the first 2 years after the deceased's death, more than 12 months was spent addressing one of the following circumstances
      • the ownership of the property or the will is challenged
      • a life interest or other equitable interest given in the will delays the disposal of the property
      • the complexity of the deceased estate delays completion of its administration
      • settlement of the contract of sale of the property is delayed or falls through for reasons outside your control
    • the property was listed for sale as soon as practically possible after none of the circumstances above were an impediment, and the sale was actively managed to completion
    • the sale was completed (settled) within 12 months of the property being listed for sale
    • none of the following materially contributed to the delay in your sale
      • waiting for the property market to pick up before selling the property
      • delay due to refurbishment of the property to improve the sale price
      • inconvenience on the part of the trustee or beneficiary to organise the sale
      • unexplained periods of inactivity by the executor in attending to the administration of the estate
    • the required extension is no more than 18 months.

    You do not need an extension if either:

    • the main residence exemption applies because an eligible person uses the property as their main residence from the date of death until the property is sold
    • there is no CGT or there is a capital loss.

    If you do not meet the conditions

    If you do not dispose of the property within 2 years and do not satisfy all the conditions for an automatic extension, you can request an extension by applying to the ATO.

    You can apply to the ATO for an extension if:

    • you are uncertain whether you meet the requirements to obtain an exemption
    • you do not satisfy all the conditions for an automatic extension but you believe an extension should be allowed.

    The ATO will only grant an extension if there are exceptional circumstances outside your control.

    Last modified: 04 Aug 2021QC 66057