Beneficiaries who inherit a property need to be aware of the various CGT implications associated with owning and selling an inherited property. When someone dies, a capital gain or loss is generally disregarded when a property passes:
• to the deceased person’s executor or other legal personal representative
• to the deceased person’s beneficiary – such as next of kin or a person named in the will
• from the deceased person’s legal personal representative to a beneficiary.
This exception does not apply if the property passes from the deceased to a tax-advantaged entity (such as a charity) or foreign resident. If you inherit a dwelling or other property after CGT started on 20 September 1985 and later sell or otherwise dispose of it, capital gains tax may then apply.
The degree to which CGT applies depends on:
• when the deceased person acquired the property • when they died
• whether the property has been used for income-producing purposes.
These rules do not apply to land or a structure you sell separately from the dwelling – they are subject to CGT. Individuals can avoid paying CGT if the property was the deceased person’s main residence and the sale is completed within two years of the date of the deceased person’s death.
CGT may apply if the deceased person’s legal personal representative sells a property as part of winding up their estate.
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