If you inherit a dwelling, there are usually no capital gains tax implications at the time you inherit it. Capital gains tax may apply when you subsequently sell or otherwise dispose of the dwelling.

How can it affect you?

If you inherit a dwelling and subsequently sell or otherwise dispose of it, capital gains tax may apply to the subsequent disposal. It depends on a number of factors, such as when the former owner died, when they (and you) acquired the dwelling, and what they (and you) did with it.

The deceased died before 20 September 1985

As you acquired the dwelling before 20 September 1985, any capital gain you make is exempt. However, major capital improvements you make to the dwelling on or after 20 September 1985 may be taxable.

The deceased died on or after 20 September 1985

In this situation, the dwelling does not need to have been the main residence (home) of the deceased.

You disregard a capital gain or capital loss you make when you dispose of the dwelling if either of the following conditions applies:

•   Condition 1 (disposal within two years)

You disposed of the dwelling within two years of the person’s death. This exemption applies whether or not you used the dwelling as your main residence or to produce income during the two-year period.

•   Condition 2 (main residence)

From the deceased’s death until you disposed of the dwelling, it was not used to produce income and was the main residence of one or more of:

o   a person who was the spouse of the deceased immediately before the deceased’s death (but not a spouse who was permanently separated from the deceased)

o   an individual who had a right to occupy the home under the deceased’s Will

o   you, as a beneficiary, if you disposed of the dwelling as a beneficiary.

These rules do not apply to:

•   land or a structure you sell separately from the dwelling – they are subject to capital gains tax

•   a share of a property you acquire on the death of a joint tenant – different rules apply in this situation.

If you are unsure if you are liable for CGT or have any other Legal or Accounting enquiries, please contact us. Here at The Quinn Group, our dedicated team of Accountants, Lawyers and Financial Planners can assist you with queries relating to Capital Gains Tax, as well as other legal and accounting matters. Complete and submit our online enquiry form or call us on 1300 QUINNS (1300 784 667) +61 2 9223 9166 to arrange an appointment.