Updated: Oct 13
Inheriting property, shares, or other assets usually does not trigger capital gains tax (CGT) on its own.
Australia does not have an inheritance tax, but CGT may arise later if the estate or a beneficiary sells or transfers an asset. The outcome depends on the asset, when the deceased acquired it, how it was used and who disposes of it.
The 2026-27 Federal Budget also introduced CGT changes that will take effect from 1 July 2027. They may affect gains accruing after that date when an inherited asset is sold. This guide explains the current deceased estate rules and what to consider as the new arrangements approach.
In This Article:
Does Inheriting an Asset Trigger Capital Gains Tax?
Usually, no. Transferring an asset to a beneficiary under a Will or the rules of intestacy generally does not trigger CGT at the time of inheritance. However, exceptions exist, including cases where an asset passes to a foreign resident, charity, or superannuation fund. The estate or beneficiary may also have tax obligations when the asset later produces income or is sold.
An estate may itself make a capital gain if its legal personal representative (usually the executor) sells an asset during administration. If an asset passes to a beneficiary, the CGT position generally continues with that asset and may need to be considered when the beneficiary later disposes of it. The rules depend on how the asset passes and who receives it.
What Happens if an Executor Sells an Estate Asset?
If the executor sells an asset while administering the estate, the deceased estate may need to report any capital gain or loss in its tax return. The tax treatment depends on the asset and the sale circumstances.
If the asset is transferred to a beneficiary under the Will or intestacy rules, the transfer generally does not produce a capital gain for the estate. Exceptions apply, and the Australian Taxation Office (ATO) says a gain or loss may need to be reported in the deceased’s final tax return in certain cases, including when the beneficiary is a foreign resident, charity, or super fund.
See the ATO’s guidance on when and how to lodge returns for a deceased estate.
Further Considerations
In the event the asset is from a deceased estate:
was acquired before a certain date (namely 20 September 1985), then it will be considered an asset that pre-dated the CGT rules due to the rules commencing after this date;
is a dwelling (for example a unit, house or apartment), then special rules will apply. For example, a main residence exemption may apply either in part or in full;
is a collectable or personal-use asset, then it will continue to be treated as such when you receive it and dispose of it;
had a net capital loss that was not applied, then it will not pass to you as a beneficiary, because you cannot use it to offset net capital gains for tax purposes.
Not Sure How CGT Rules May Affect an Inherited Home or Other Estate Asset?
The outcome can depend on the asset’s history, how it was used and when it is sold. Contact RHC Solicitors to discuss the estate administration process and whether you may need advice from a tax professional.
How Is the Cost Base of an Inherited Asset Worked Out?
The cost base generally determines a capital gain or loss when you sell an asset. For an inherited asset, it may be based on the deceased’s cost base or the asset’s market value at the date of death. The applicable rule can depend on when the deceased acquired the asset and the type of asset involved.
For example, special rules apply to assets acquired before CGT began on 20 September 1985. Other rules may apply to a dwelling that was the deceased’s main residence immediately before death and was not being used to produce income. These rules can affect whether the asset’s cost base is carried over or based on market value at death.
Do not assume that the market value at the date of death is always the cost base. Ask the executor for relevant purchase records, improvement costs and any valuation they obtained. A tax professional can help identify which rule applies.
Working Out A Capital Gain Or Loss
Assets can increase or decrease in value.
A capital gain occurs when you sell an asset for more than you paid, and a capital loss occurs when you sell it for less than you paid.
When calculating a capital gain, you need to consider when the asset was acquired, the ownership period, whether it exceeds 12 months, and the type of entity disposing of the asset (e.g., a company, trust, individual, super fund, and so on).
Because of the complexities, we always advise our clients to consult a financial adviser to help calculate the capital gain or loss. This is particularly important when using strategies to manage tax implications.
Can an Inherited Home Be Exempt From CGT?
Possibly. A full or partial main residence exemption may apply when you sell an inherited dwelling. The result depends on factors that can include:
whether the dwelling was the deceased’s main residence just before death;
whether it was being used to produce income;
when the deceased acquired it;
who lived in it after the death; and
when the executor or beneficiary disposed of it.
In some circumstances, a full exemption may be available if the home is disposed of within two years of the deceased’s death. The Commissioner may allow more time in certain circumstances. Other pathways depend on whether the dwelling is the main residence of a relevant person, such as a beneficiary or someone with a right to occupy it under the Will.
A partial exemption may apply if the full conditions aren't met. The ATO explains the rules for inherited dwellings and the main residence exemption.
What About Shares, Managed Funds, Collectables and Personal-Use Assets?
Shares and managed fund interests are generally subject to the usual CGT rules when sold. The cost base, and any available discount or other treatment, depends on the asset’s history, the deceased’s ownership, and the beneficiary’s circumstances.
Collectables and personal-use assets have separate rules. The deceased’s net capital losses generally do not pass to a beneficiary and cannot be used by the estate to offset its later capital gains. Keep records of the asset and how you acquired it, as special rules may apply.
What Records Should an Executor or Beneficiary Keep?
Keep documents that may be needed to establish the asset’s cost base, use and ownership history, including:
the deceased’s purchase contract and settlement records;
details and receipts for capital improvements;
valuations, including any valuation at the date of death;
records of rental income and expenses;
estate administration and sale costs; and
documents showing when the asset was transferred or sold.
The right records depend on the asset and the applicable CGT rules. The ATO recommends obtaining relevant information from the executor or trustee and keeping records until they are no longer needed for tax purposes.
If the asset was acquired on or after 20 September 1985, you will generally need a valuation report to evidence the market value, the deceased's costs, and costs incurred during the administration phase.
What Do the 2026-27 Budget CGT Changes Mean for Inherited Assets?
The Budget’s core CGT changes are now law. From 1 July 2027, the flat 50% CGT discount for individuals, trusts and partnerships is replaced by cost base indexation for relevant gains, and a minimum 30% tax rate applies to real capital gains.
The changes are prospective, so gains accruing up to 30 June 2027 retain the existing treatment, while gains accruing from 1 July 2027 are subject to the new arrangements when realised. Investors in new builds may choose between the existing discount and the new arrangements.
This does not introduce an inheritance tax or mean that receiving an inherited asset automatically creates a CGT bill. It may change how a taxable gain is calculated when an estate or beneficiary sells an asset after 1 July 2027. The calculation depends on how much of the gain accrued before and after that date, the asset’s status, and the applicable transitional rules.
Treasury has consulted on further details of CGT reform, including how certain gains distributed through deceased estates are treated. Check those details against the latest enacted legislation and ATO guidance before an executor or beneficiary acts.
Should I Get Tax Advice Before Selling an Inherited Asset?
Yes, if you are unsure how the rules apply.
A sale can involve the estate’s tax return, a beneficiary’s tax position, the main residence exemption, historical cost-base information and the new CGT rules from July 2027.
A registered tax agent or accountant can assess the tax treatment. The executor may also need legal advice about administering and distributing the estate.
Managing an Estate Can Involve Important Legal and Tax Decisions.
If you need help with the legal aspects of administering a deceased estate, contact RHC Solicitors. For advice on your specific CGT position, speak with a registered tax agent or accountant.
Originally Published: 2 January 2020
Last Updated: 13 October 2026
Disclaimer: This publication is not intended to be comprehensive, nor does it constitute legal advice. We are unable to ensure the information is current, and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication. The views and/or opinions expressed in this publication are those of the author and may not necessarily represent the views and/or opinions of RHC Solicitors.
Scott A. Green ©
