When a person dies, their assets pass to their estate — and eventually to beneficiaries. The general rule in Australia is that death itself does not trigger CGT. Instead, the CGT liability is deferred until the beneficiary disposes of the asset.
No CGT at Death
The passing of an asset from a deceased person to their estate (or directly to a beneficiary) is not a CGT event. The deceased does not pay CGT on the gain accrued up to death.
However, when the beneficiary eventually sells the asset, CGT applies — and the rules for calculating the gain depend on whether the asset is a pre-CGT or post-CGT asset.
Post-CGT Assets: The Cost Base Reset
For most inherited assets acquired by the deceased after 20 September 1985 (post-CGT assets), the beneficiary takes the asset at its market value at the date of death as the cost base.
This effectively “resets” the cost base to market value — the gain accumulated during the deceased’s lifetime is forgiven.
Example:
- Deceased purchased shares in 1995 for $10,000
- Market value at date of death: $80,000
- Beneficiary inherits shares (cost base: $80,000)
- Beneficiary sells shares later for $90,000
- Capital gain: $90,000 − $80,000 = $10,000
Pre-CGT Assets: No Reset
For assets acquired by the deceased before 20 September 1985 (pre-CGT assets), the beneficiary inherits the asset as a pre-CGT asset. When the beneficiary sells, no CGT applies — the asset retains its pre-CGT status.
The 12-Month Holding Period for the 50% Discount
When a beneficiary inherits an asset and later sells it, the holding period for the 50% CGT discount is calculated from the date the deceased acquired the asset — not the date of death. This means that most inherited assets will already qualify for the 50% discount.
However, if the deceased acquired the asset within 12 months before death, the holding period starts fresh from the date of death.
Inherited Main Residence — The Two-Year Rule
If you inherit a deceased person’s main residence, you generally have two years from the date of death to sell it and access the full main residence CGT exemption — regardless of what you do with the property in that period (e.g., rent it out).
If you sell after the two-year period, a partial exemption applies based on the proportion of time it qualified as a main residence.
The full exemption also applies if:
- The property was the deceased’s main residence just before death, AND
- It was not used to produce income just before death, AND
- You sell within two years of death
Superannuation and Death Benefits
Death benefits paid from superannuation are not subject to CGT — they may be subject to income tax depending on whether they are paid to a tax dependant or non-dependant. Superannuation is generally not part of the deceased estate for CGT purposes.
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Frequently Asked Questions
Do you pay CGT when you inherit an asset in Australia? No — inheriting an asset is not a CGT event. CGT arises when you (as the beneficiary) later sell the inherited asset.
What is the cost base of an inherited property? For post-CGT assets (acquired by the deceased after September 1985), the cost base is generally the market value at the date of death. This effectively shelters any gain that accrued during the deceased’s lifetime.
Can I sell an inherited property CGT-free? If the property was the deceased’s main residence, you generally have two years to sell it CGT-free. After two years, a partial or full CGT liability may arise depending on the circumstances.
This article provides general tax information for FY2025–26. For advice tailored to your situation, speak with a registered tax agent or accountant. Find one through the Tax Practitioners Board register.