A common question many people ask when inheriting property is: Do you have to pay Capital Gains Tax when selling an inherited property?

The answer depends on several factors, including the original purchase date, the inheritance date, how the property was used, and when it is sold.

If the deceased passed away before 20 September 1985, the inherited property is generally fully exempt from CGT. However, major renovations or extensions done after inheritance may still be taxable.

If the deceased acquired the property before the CGT system began and the inheritor sells it within two years of inheritance, full CGT exemption usually applies. In special circumstances, the ATO may grant an extension.

A CGT exemption may apply if the property was:
• The deceased’s main residence
• Not used to generate income
• Sold within two years of the date of death

If the inheritance occurred before 20 August 1996, CGT exemption may still apply if the property continued to be the main residence of:
• The deceased’s spouse
• A beneficiary with occupancy rights
• The inheritor

Capital Gain = Sale Price – Cost Base

The cost base may include:
• Original purchase price
• Stamp duty
• Legal fees
• Renovation or improvement costs
• Holding expenses

If the property is held for more than 12 months before sale, individuals and trusts may be eligible for the 50% CGT discount.

Whether CGT applies to inherited property depends on several conditions. Incorrect reporting can result in unnecessary tax or penalties.

FABC Accounting can assist with:
• Inherited property CGT assessments
• Tax structuring and optimisation
• Compliance and ATO guidance

Contact our team to ensure your inheritance is handled correctly and tax-effectively.