Capital gains tax on inherited property

Understanding Capital Gains Tax on Inherited Property
Inheriting property can be a bittersweet experience, as it often comes with the loss of a loved one. However, it's crucial to understand the potential tax implications that may arise when dealing with inherited property in Australia. One of the significant considerations is the capital gains tax (CGT), which can significantly impact the value of your inheritance. In this article, we'll explore the key aspects of capital gains tax on inherited property and provide insights on how to navigate this complex area effectively.

Capital gains tax is a tax levied on the profit or gain realized from the sale or disposal of an asset, such as property, shares, or other investments. In the context of inherited property, CGT becomes relevant when the beneficiary decides to sell or dispose of the property.

Calculating CGT on Inherited Property

When calculating CGT on inherited property, the cost base is typically the market value of the property at the date of the deceased’s death. This means that any capital gain or loss is calculated based on the difference between the sale price and the property’s value at the time of inheritance.

For example, if you inherit a property valued at $500,000 at the time of the deceased’s death and later sell it for $600,000, the capital gain would be $100,000 ($600,000 – $500,000). This capital gain would be subject to CGT, which is typically taxed at your marginal tax rate.

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