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LoungeLizard(Initiate)Initiate
19 Nov 2021

My mother purchased a property in 1991 in NSW for us to live in but it was solely in her name. It was not her principal place of residence. We lived there until 2001 and she would stay with us at times until we bought a business and moved to Tasmania at which time the house was rented out for 3 years. After that time our daughter moved into the house and is still there until this day. Now my mother has passed away and we have inherited the house. We are not going to sell the house and our daughter will remain in the house because when we pass it will become her inheritance. We are unsure as to whether we will now be subject to capital gains tax or is that only payable if we sell the property. Are there any exemptions because apart from those 3 years it has always been family living in the house? We paid her a nominal rent for the privilege of living in the house as did our daughter.

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3,242 views
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Bruce4Tax(Taxicorn)Taxicorn
ATO Certified Response21 Nov 2021

Death is not a disposal for CGT. But, when you inherit a post-CGT asset, you also inherit the cost base of the deceased. It is now your main residence, but only from date of death. If your daughter inherits the property from you, then she inherits the original cost base from you as well. And so on, until the property is sold. If it has always been the main residence of the seller, then no CGT. If it is the main residence, and then rented, then the cost base will be reset to market value when first rented - the earlier period of rental does not count because it was not the was not a main residence then. Best to get expert advice relevant to your particular circumstances.

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Most helpful replyATO Certified Response

Bruce4Tax(Taxicorn)Taxicorn
ATO Certified Response21 Nov 2021

Death is not a disposal for CGT. But, when you inherit a post-CGT asset, you also inherit the cost base of the deceased. It is now your main residence, but only from date of death. If your daughter inherits the property from you, then she inherits the original cost base from you as well. And so on, until the property is sold. If it has always been the main residence of the seller, then no CGT. If it is the main residence, and then rented, then the cost base will be reset to market value when first rented - the earlier period of rental does not count because it was not the was not a main residence then. Best to get expert advice relevant to your particular circumstances.

JodieR_ATO(Community Support)Community Support
22 Nov 2021

Hi @LoungeLizard,


If you inherited a property as @Bruce4Tax advised, this does not trigger a CGT event. However, you can go through the questions under inherited dwellings to check if you'll be liable for CGT. For inherited Australian properties, the date the person passed away is deemed acquisition date for the beneficiaries.

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