Quick answer
Inheriting a property does not trigger capital gains tax by itself. CGT is worked out when you later sell. The cost base you use (broadly, what was paid for the property) depends on when the person who died acquired the property and how it was used, and a date of death valuation is often needed as evidence.
When you inherit a property, the first question is usually: what was it worth on the date of death? CGT on inherited property is not paid when you inherit, but the value on the date of death often shapes your tax when you sell. A CGT valuation at that date is what turns a guess into a supported figure.
This guide covers capital gains tax on inherited property : how the cost base works, when a date of death valuation is needed and what executors should gather. Estates vary, so take the tax detail to your accountant. We cover the valuation side, including property valuations for estates and family law valuations when an estate is disputed or divided.
In this guide
Is there CGT on inherited property?
Generally, there is no CGT on the death of the owner, and none when the property passes to a beneficiary (the person who inherits it). CGT is worked out later, when the beneficiary sells or otherwise transfers the property. At that point the cost base matters, because the gain is worked out from it.
Which cost base applies to inherited property?
The rules turn on one fact: when did the person who died acquire the property?
| When they acquired it | Your cost base is generally | Why it matters |
|---|---|---|
| Before 20 September 1985 (pre-CGT) | The market value at the date of death | That value is the starting point for your gain, so it needs evidence |
| On or after 20 September 1985 | Their cost base, which you take over | Their purchase price and costs matter, so their records are important |
Illustration only. It assumes no main residence exemption applies. Separate rules apply to dwellings and to property that was rented out or used to produce income. Confirm the position for your estate with your accountant.
What if the property was the family home?
If the property was the main residence of the person who died, a full or partial exemption may be available, particularly if it is sold within two years of the date of death. The ATO can extend that period in some circumstances. If the property is rented out first, or kept for longer, different rules apply and the value at the date of death can become important.
When is a date of death valuation needed?
A market valuation as at the date of death is commonly needed when:
- The person who died acquired the property before 20 September 1985
- The property was the family home and is now rented out or held for longer than the usual period
- The beneficiary wants clear evidence of value, because no valuation was done at the time
- The estate is being divided and the beneficiaries need an agreed value
Need a date of death value for a property?
Tell us the property and the date. We confirm scope, timing and fee before any work starts, and the first call is free.
Are probate and insurance values enough?
Often not. A figure used for probate (the court process that confirms a will), insurance or a council rating may not have been prepared for CGT. A CGT valuation should state the valuation date, the type of value (market value), the evidence relied on and the purpose. If the date of death is some time ago, a retrospective valuation can establish market value at that date from sales evidence at the time.
Inherited property held on 1 July 2027
If you still hold the inherited property on 1 July 2027, the switch-over rules for the CGT changes may apply as well. You may then need a value at the date of death and a value as at 1 July 2027.
Mistakes to avoid
Common mistakes:
- Using a probate or insurance figure without checking it. It may not state the date, the type of value or the evidence a CGT valuation needs.
- Waiting years for the date of death evidence. Sales evidence and property details are easier to establish sooner.
- Renting out the home without getting a value. The value at that point can matter later.
- Missing the two-year window when the home may qualify for the main residence exemption. Ask your accountant early.
- Not telling the valuer the purpose. A valuation for CGT should say what it is for.
Key terms explained
- Executor
- The person named in a will to manage the estate, including selling or transferring property.
- Probate
- The court's confirmation of a will, which lets the executor deal with the estate. A probate value is the figure used for that process.
- Cost base
- Broadly, what was paid for the property plus certain costs. For inherited property, which cost base you use depends on when the person who died acquired it.
- Date of death value
- The market value of the property on the day the owner died.
- Main residence exemption
- An exemption from CGT for a person's home. For inherited property it can apply in part or in full, depending on how the home was used and when it is sold.
Need a CGT valuation? Talk to a valuer.
Tell us the property, the date you need the value for and what it is for. We will tell you what is needed and what it involves.
Free first call. Fee confirmed before work starts. Certified Practising Valuer. Australia-wide.
Sources and further reading
- Australian Taxation Office: Capital gains tax
- Australian Property Institute: The CGT changes and property valuations
This is general information, not tax advice. Speak to your accountant or tax adviser about your own position. A valuation sets out market value at a stated date. It does not work out your tax.