Private ruling: Capital gains tax
Date of advice: 22 May 2026
Published: 3 August 2026
Ruling period: Year ending 30 June 20YY | Year ending 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Is the capital gain disregarded when the property is transferred to you from the estate as beneficiary? | A1: Yes. | Q2: Will a capital gains event A1 be triggered when you sell the property as owner of the property? | A2: Yes. | Q3: Will the first element of the cost base of the property be your parent's cost base at the date of their death? | A3: Yes. | Q4: Will a capital gains event A1 be triggered if you transfer a percentage of the property to your spouse? | A4: Yes. | Q5: Will you be entitled to a 50% discount on the capital gain if you hold the property for more than 12 months when you sell it? | A5: Yes.

Relevant facts and circumstances: Your parent purchased the property a number of years ago. You and your spouse have lived in the property since the deceased purchased it. It was your understanding that the house was yours despite never being transferred into your name by your parent. You and your spouse had work done on the property, which was paid by you and your spouse: You and your spouse paid for the ongoing costs of the house by paying these amounts for rates insurance etc to your parent and then they paid the accounts. Your parent had landlord insurance on the property. Your parent passed away a couple of years ago. The property was transferred into your name as beneficiary under their will. You are intending on transferring a percentage of the property to your spouse You intend on selling the property in the future.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 128-10 | Income Tax Assessment Act 1997 section 128-15 | Income Tax Assessment Act 1997 section 128-20 | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: You make a capital gain or loss as a result of a capital gains tax (CGT) event happening to a CGT asset. CGT assets include real estate acquired on or after 20 September 1985. CGT events are those transactions that occur to a CGT asset that result in you either making a capital gain or capital loss. You make a capital gain if your capital proceeds from the sale of a CGT asset are greater than the cost base for the purchase of that asset, for example, if you receive more for an asset than you paid for it. You make a capital loss if your reduced cost base for the purchase of that asset is greater than the capital proceeds resulting from the sale of that asset, for example, if you receive less for an asset than you paid for it. Capital gains tax is not a separate tax; it forms part of your assessable income and is taxed at your marginal tax rate. Division 128 of the Income Tax Assessment Act 1997 (ITAA 1997) deals with the capital gains tax (CGT) consequences that arise from a deceased estate. Under section 128-10 of the ITAA 1997, when a person dies, any capital gain or capital loss that results from a CGT asset the person owned just before dying devolving to their legal personal representative or that pass to a beneficiary is disregarded. The term 'legal personal representative' (LPR) is defined in subsection 995-1(1) ITAA 1997 and relevantly includes, 'an executor or administrator of an estate of an individual who has died...' For Australian tax purposes, the Commissioner treats a LPR such as an executor or administrator as a trustee and will treat the deceased estate as a trust estate. Any CGT consequences are deferred until there is a subsequent disposal by the LPR or beneficiary. Subsection 128-15(3) of the ITAA 1997 states that any capital gain or loss the legal personal representative of a deceased estate makes if an asset 'passes' to a beneficiary in the estate is disregarded. Section 128-20 of the ITAA 1997 lists the ways in which an asset is considered to pass to a beneficiary of an estate. The most common of the ways mentioned is where the beneficiary becomes the owner of the asset under the will. Subsection 104-10(1) of the ITAA 1997 states that CGT event A1 happens if you dispose of a CGT asset. Subsection 104-10(2) of the ITAA 1997 defines disposal as 'you dispose of a CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law.' The property was transferred to you from your parent's estate into your name as beneficiary. There will be no CGT payable at the time it is transferred into your name as beneficiary, the CGT at this point is disregarded. If you sell the property in the future, you will then be required to pay CGT on the sale of the property. The first element of the cost base of the property is your parent's cost base at the date of their death, and this is what they paid for the property when they purchased it. Your capital gain will be the difference between the purchase price of the property and what you sell the property for. Any improvements made on the property cannot form part of the cost base as your parent did not pay for them. If you transfer a percentage of the property to your spouse this will trigger CGT event A1.