Property Inheritance – CGT Implications

Since the introduction of capital gains tax in September 1985 if you inherit a dwelling or other property and later sell or otherwise dispose of it, capital gains tax may apply to either the deceased estate or yourself as beneficiary.

Inheriting a property

When someone dies, in the first instance a capital gain or loss is generally disregarded at the point when a property passes:

  • to the deceased person’s executor or other legal personal representative
  • to the deceased person’s beneficiary –- such as next of kin or a person named in the will
  • from the deceased person’s legal personal representative to a beneficiary

These provisions only apply, however, as long as the property doesn’t pass from the deceased to a tax-advantaged entity (such as a charity) or foreign resident.

Inheriting a home

If you inherit a deceased person’s dwelling, you may be exempt or partially exempt when a capital gains tax (CGT) event happens to it, for example: sell it. The same exemptions apply if a CGT event happens to a deceased estate of which you are the trustee.


The degree to which CGT applies depends on:

  1. when the deceased person acquired the property. That is, did the deceased acquire the property before or after 20th September 1985?
  2. when they died?
  3. whether the property has been used for income-producing purposes?

These exemptions do not apply to land or a structure you sell separately from the dwelling as they are not considered to be part of the home and is they are subject to CGT.

In part 2 of this article we will look at specific provisions applying to the disposal of a deceased principle residence

If you have any questions or require assistance with a deceased estate please contact Paris Financial on 03 8393 1000.

Steve Wildes, Partner, Paris Financial

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Property Inheritance Article Series

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