Capital gains tax on inherited property
Inherited property doesn't trigger CGT immediately – but it can apply when the beneficiary later sells. Here's how the rules work.
When you inherit property in Australia, no immediate CGT applies. Instead, the cost base from the deceased rolls over to you. CGT applies when you later dispose of the property, calculated against that rolled-over base. There’s a major exemption for the deceased’s main residence sold within 2 years.
How cost base rollover works
For property the deceased acquired post-CGT (after 19 September 1985), you inherit their original cost base plus any capital improvements. For property acquired pre-CGT, you inherit it at market value on the date of death.
Main residence exemption
The deceased’s main residence retains its tax-free status for 2 years after death if sold within that period. After 2 years, ordinary CGT applies to growth from the date of death (or original cost base if you continue to occupy as your main residence).
Investment property
Inherited investment property carries the deceased’s cost base and acquisition date. The 50% CGT discount applies if you hold for 12 months from inheritance. Selling immediately can mean substantial CGT – sometimes worth holding strategically.
Multi-beneficiary inherited property
When multiple beneficiaries inherit a single property, each holds a fractional interest. Disposal can be staggered or coordinated. Sometimes one beneficiary buying out the others is more tax-efficient than a sale.
Summary
Inherited property doesn’t trigger CGT immediately – but it can apply when the beneficiary later sells. Here’s how the rules work.
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Disclaimer: This article is general information only and does not constitute legal advice. Estate planning is deeply personal - every family's circumstances are different. For advice specific to your situation, please contact Rosewood Succession Solicitors.