Death, inheritance, and CGT

The death of a parent is a challenging time. And once the initial shock passes, there comes the inevitable need to deal with their estate, which often includes the inheritance of property.

Not only is this challenging to family dynamics, but it can also raise complications and tax issues for the children who inherit the property. 

Firstly, you must consider whether you’ll sell the property, live in it, or develop the site. How you decide to proceed can determine the outcome for Capital Gains Tax.

How the property was owned is also significant when it comes to potential CGT implications – that is, did the deceased own the property personally, jointly, or in an entity structure? These will impact whether the main residence exemption can be applied.

A full CGT exemption can apply under certain conditions, including whether the property was initially purchased before CGT was introduced in September 1985, or after. If it was before then, the use and purpose of the property are not relevant, but if the property was purchased after the introduction of the tax, they are. 

If the dwelling was bought post-CGT then it is important that the property was the deceased’s main residence just before death, and not being used for income producing purposes.

This can be further complicated if the property was being rented out to fund your elderly parent living in aged care.

CGT is a really complicated area of tax law, which often comes into play at a really difficult time for families. If we can help, please reach out.