The ATO’s New View on Life Interests: What Executors and Beneficiaries Need to Know

Why does this matter?

In some circumstances, a property inherited from a deceased estate can be sold without triggering CGT. This can include where the property remains the main residence of a person who has a right to occupy it under the deceased’s will.

The ATO’s draft determination takes a much narrower view of what qualifies as a “right to occupy”.

What is the ATO’s view?

According to the draft determination, only where the right to occupy is clearly written into the will and granted to a specific individual would the main residence exemption be able to apply.

The ATO’s view is that the exemption may not apply where:

• The right to occupy is agreed after death
• The executor or trustee decides who can live in the property
• The right to occupy is contained in a testamentary trust rather than the will itself

Who should review their arrangements?

This draft determination may be relevant if:

• Your estate plan includes a testamentary trust
• A beneficiary is living in a deceased estate property
• Your will contains a life interest or right to reside arrangement
• You are an executor administering an estate that owns property

Why is this controversial?

Many advisers have historically taken the view that rights granted through a testamentary trust could achieve the same CGT outcome as rights granted directly under a will.

The ATO’s draft determination rejects that interpretation.

As a result, some existing estate planning arrangements may not produce the tax outcome originally intended.

The ATO is also proposing that the final determination will apply to income years both before and after it is issued.

Existing estate plans may need to be reviewed and, where the will-maker is still living, amended if appropriate. For estates already under administration, specialist tax and legal advice may be required to determine the available options

Next Steps

This is currently a draft determination, and the ATO’s final position may change.

If your estate plan includes a testamentary trust, life interest, or right to occupy arrangement, now is the time to review whether the intended CGT outcome is still achievable.

If you would like to discuss how these proposed changes could affect your circumstances, please contact the Macro Group team.

Helpful resources

ATO Draft Determination TD 2026/D1: TD 2026/D1 | Legal database