Deceased estates – safe harbour from capital gains

The Commissioner has released Practical Compliance Guideline (PCG) 2019/5 to outline:

1. a safe harbour compliance approach in relation to a sale of property acquired from a deceased estate outside of the two year period; and

2. the factors the Commissioner will consider when deciding whether to exercise the discretion to extend the two year period.

In August's Monthly Tax Update, Frank Hinoporos, CTA, (Hall & Wilcox Lawyers) looks at the key issues for advisers related to this PCG.

Pursuant to section 118-195 of the Income Tax Assessment Act 1997, where an ownership interest in a principal place of residence passes to an individual beneficiary or trustee of the deceased’s estate within two years of the deceased’s death, any capital gain or loss made on the disposal of the property is disregarded.

Taxpayers must satisfy all five of the conditions specified in the PCG if they wish to have the capital gain or loss disregarded.

The PCG provides a ‘safe harbour’ which, if it applies, means that the taxpayer does not need to apply to the Commissioner in order for the Commissioner to exercise its discretion to disregard capital gains and losses.

Where the conditions are satisfied, the taxpayer can proceed on the basis that the Commissioner has exercised its discretion to disregard any capital gain or loss.
Members, you can hear more from Frank in your Monthly Tax Update here.

The Monthly Tax Update also covers the following important issues that arose in July:
  • A recent decision relating to lump sum insurance payments
  • The power of the Court to order the distribution of trust income and capital to a non-beneficiary
  • A decision relating to taxpayer entitlement to the primary production land tax exemption.

It also takes a look at some issues with Div 7A and unpaid present entitlements under sub-trust arrangements, as well as CGT and changes to the main residence exemptions for foreign resident.

Each month, these focused, one-hour updates will get you up-to-date with the latest developments.
They also give you the opportunity to earn up to 10 CPD hours – free, each year. 
This new benefit is available for all Associate, Fellow and Chartered Tax Adviser members.
Find out more, and watch this month's update here.

Frank Hinoporos, CTA, is a Special Counsel in the Tax group at Hall & Wilcox Lawyers. 
His clients include SMEs, high net worth individuals and families and not-for-profit entities. Frank is a member of the Law Institute of Victoria and a Chartered Tax Adviser with The Tax Institute, and the presenter of the Institute's Monthly Tax Updates.


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