It is prudent for testators, executors and beneficiaries to be aware of the Capital Gains Tax (“CGT”) implications for deceased Estates. Effective tax planning can have a significant bearing on the amount of tax paid by the Estate and/or beneficiaries.

What is CGT?

CGT is the tax which must be paid on the ‘capital gain’ arising from the disposal of an asset acquired on or after 20 September 1985. The applicable tax rate depends on the marginal rate of a taxpayer in any particular year.

Due to the rollover provisions the initial transmission of assets to the Executor does not usually trigger CGT, unless the asset is being gifted to a non-resident or tax-exempt entities.  However, CGT is automatically triggered if the executor disposes of the asset. If the deceased held the asset for more than 12 months the net capital gain is reduced by 50%.

No CGT is triggered where the asset was the principal place of residence of the deceased immediately prior to their passing.  Various conditions apply, including but not limited to:

  • the residence must be sold within 2 years of the deceased’s date of death; and
  • the residence continues to be occupied by the deceased’s spouse or a person with a right under the will.

Depending on the deceased’s circumstances partial exemptions may also apply.  It is therefore important to seek advice on these matters in advance to maximise the Estate and beneficiaries’ access to tax concessions.

For advice and assistance on tax effective estate planning please contact our taxation lawyers at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.