Consequences of Death - Property & Capital Gains Tax

Written by Shukri Barbara

Below are simplified answers to various queries relating to capital Gains Tax & property of a deceased as it passes onto beneficiaries:

The General Rule	Capital Gains/Loss on assets owned by deceased before death are ignored for the deceased.
A Taxpayer dies. Assets pass onto the legal personal representative (e.g. executor of will or administrator if no will) of the deceased or a beneficiary – what is the position	The assets are taken to have been acquired by these people on the day the taxpayer died
What is the cost base to the recipient if the asset was a acquired pre 1985 by the deceased	Market Value at the date of decease. Important to get market valuation shortly after decease.
What is the cost base if the property is a post CGT asset i.e. acquired after 19/9/85	The deceased cost base will be the beneficiary's cost base
What if the asset was the main residence of the deceased and was not income producing	Cost base to the beneficiary will be market value.
What if asset is used by a life tenant and later passed onto a remainder beneficiary	The cost base is considered to be market value at the date of death of the deceased and not the life tenant
Joint owners – what is the position if the asset is income producing	The surviving partner is taken to have acquired the other interest (say 50%) at the date of decease. Cost base of that interest will be the market value at the date of death
Joint Owners – main residence	Exempt from CGT
Pre CGT Dwelling – sold by beneficiary after death	No CGT if disposal is made within 2 years from date of decease
What if the beneficiary is a non-resident	A CGT event would have occurred with the market value on the date of death. The cost base would be the deceased cost base The gain/loss will be included in the deceased final tax return.
What if property bequeathed to tax registered charity or gift recipient	No CGT

Basically, No CGT liability arises on main residence or an income producing asset being received after decease.

There may be liability when the beneficiary disposes of the property. At that stage the CGT will depend on the cost base of the property. So it is important to find out when to get a market valuation. http://www.ato.gov.au/individuals/content.asp?doc=/content/57405.htm&page=2&H2

On its introduction in September 1985 CGT was budgeted to collect only $25m. It has collected about $4b. Who needs death duties when you have CGT.

Disclaimer - the above is intended only as a general informational guide only. This is not advice. You should not act on it without consulting your CPA accountant or financial adviser.

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