Death defers the tax, it does not cancel it
Division 128 of the ITAA 1997 provides a rollover on death. No capital gain or loss arises for the deceased when the asset passes to the legal personal representative or to a beneficiary, and nothing is payable by the estate on the transfer itself.
The consequence is that the beneficiary inherits a tax position along with the property. What that position is depends entirely on the deceased’s acquisition date, which is why executors are asked for old contracts before anyone asks about current value.
The beneficiary’s cost base
This table decides whether a valuation is needed at all. It is the first thing to establish in any deceased estate matter.
How the beneficiary’s cost base is determined
The two-year rule
Section 118-195 can give a full exemption on the sale of an inherited dwelling, so that no CGT is payable at all. Broadly, it applies where the dwelling was the deceased’s main residence just before they died and was not then being used to produce income, and the beneficiary or trustee disposes of it within two years of the date of death.
Two years is measured from the date of death, and settlement inside that window is what matters in practice. Where the estate cannot achieve it — a contested will, a delayed grant of probate, a beneficiary who cannot be located — the Commissioner has a discretion to extend the period, and there is a published safe harbour setting out when an extension can be self-assessed rather than applied for. Confirm the current terms with your accountant before relying on it.
Why a valuation is commissioned early, not at sale
Where a date-of-death valuation is required, it is much cheaper and stronger to obtain it while the property is still in the condition it was in when the deceased died. Once the house is cleared, repainted, renovated for sale or demolished, the valuer is reconstructing a condition rather than observing it.
Executors frequently come to us years after the death, once a beneficiary has decided to sell. We can still prepare the report — that is ordinary retrospective work — but the evidence set is narrower and the fee is higher. If you are administering an estate now and any beneficiary may sell later, get the date-of-death figure recorded now.
Where several beneficiaries inherit shares
Each beneficiary acquires an ownership interest and each has their own cost base and their own main residence position. One sibling living in the property and another living elsewhere can end up with quite different outcomes on the same sale.
One valuation of the whole property supports every beneficiary’s position; there is no need for separate reports per share. We address the report to the estate or to the executor so that all beneficiaries and their accountants can rely on it.