Understanding Capital Gains Tax Implications on the Family Home
Many people are able to remain in their family home until they pass, however when they do pass, dealing with financial issues, knowing what to do and making important decisions, while managing your own emotions at a challenging time isn’t easy, not to mention time consuming and confusing.
So, it’s essential you are aware of the potential financial implications, particularly when it comes to Capital Gains Tax (CGT).
Exemption on the family home
Usually, your principal residence is exempt from CGT. This exemption means you can sell your family home without incurring tax on the property’s capital gains—essentially the profit made from the sale. However, this exemption becomes less straightforward when considering the inherited family home.
However, a property that is inherited, while the legislation stipulates the home is exempt from CGT during the owner’s lifetime, this exemption doesn’t apply on their death.
This means that if you inherit a family home, you are responsible for any capital gains incurred from that point on, and could face substantial CGT liabilities if you decide to sell the property.
Knowing how CGT operates, particularly after death, will enable you and other beneficiaries to make informed decisions.
CGT exemptions on inherited property
An inherited property is exempt from CGT if you dispose of it within two years of the deceased’s death, and either:
- the deceased acquired the property before September 1985
- at the time of death, the property was the main residence of the deceased and was not being used to produce income.
Find out more about inherited property and CGT on the ATO website here.
Preventing heartache
Having the conversations with loved ones and planning ahead is essential, and we have a comprehensive free resource to help you.
Property law specialist Allan Farrar has been providing expert advice and guidance in this field for over forty years. In this free e-book, ‘Selling in Unexpected Circumstances’, he shares critical knowledge that can help families navigate difficult legal and property legislation in the event of a loved one passing.
Written in plain English, ‘Selling in Unexpected Circumstances’ is a step-by-step guide of what do to in the event of a loved one passing away. It clearly explains what documents you need, who you need to notify, what to do if there is no will and much, much more.
You can get this book straight to your phone. Simply text the word ‘Unexpected’ to ‘0488884520’ and we will send you a link so you can download it.
From property tax issues, valuations and selling a property to explaining power of attorney, dealing with debt and what to do if there are disputes, ‘Selling in Unexpected Circumstances’ will help you plan and guide you through a challenging time, giving you the knowledge to make informed decisions.
Seek professional advice
By planning ahead and seeking professional expert advice, families can preserve more of their hard-earned wealth for generations to come while navigating the complexities of tax obligations. A well-thought-out approach can ensure the cherished family home remains a source of joy and unity, rather than a financial burden.
We do more than simply sell or manage property – we’re here to make your life easier. At a particularly a challenging time, our compassionate and experienced team will guide you through the process to help you make informed decisions.
This is why, with nearly 50 years in the business, we are one of Newcastle’s longest established real estate offices.
Call in and see us in the Cardiff office, give us a call on 02 4954 8833 or send us an email to: mail@apnewcastle.com.au.
For tips on selling your property and what to look for when buying a property, visit our Facebook page.
Don’t forget to text the word ‘Unexpected’ to ‘0488884520’ to instantly receive our free resource.