To reduce Capital Gains Tax (CGT) on an inherited property in Australia, you should leverage available exemptions, concessions, and strategic timing. Key strategies include selling within two years of the date of death, making the property your main residence, increasing the cost base with capital improvements, and utilising the 50% CGT discount.
Sell Within Two Years of Inheritance: The most effective way to avoid CGT is to sell the property within two years of the deceased's date of death, provided it was their main residence and not used to generate income.
An easy and impactful way to reduce your capital gains taxes is to use tax-advantaged accounts. Retirement accounts such as 401(k) plans, and individual retirement accounts offer tax-deferred investment. You don't pay income or capital gains taxes on assets while they remain in the account.
An inherited property is exempt from CGT if you dispose of it within 2 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.
From the proceeds value (or deemed proceeds value), you should deduct the allowable costs, which include the original purchase price, enhancement expenditure (such as capital improvements) and incidental costs of acquisition and disposal (such as legal fees, surveyor fees, stamp duty land tax and estate agent fees).
If your beneficiaries inherit property and/or investments, they pay capital gains tax at the time they sell it.
No, inheriting property itself does not trigger a CGT bill. Instead, the property's value is established during probate, which is referred to as the "probate value." This value becomes the baseline for calculating any potential gains if the property is sold later.
If you're financially secure and want to preserve the property for future generations, keeping it may be the right choice. If you're looking for a quick, efficient sale and want to avoid the headaches of a traditional market, selling via auction could be your best bet.
There are no inheritance or estate taxes in Australia. However, you may have tax obligations for the assets you inherit: capital gains tax may apply if you dispose of an asset inherited from a deceased estate. income tax applies as usual to any dividends or rental income from shares or property you inherited.
Advantages of long-term capital gains
In 2026, a single filer with taxable income up to $49,450 pays 0% on long-term capital gains, while short-term gains in that same income range are taxed at ordinary income rates up to 12%.
In simple terms: you can sell or restructure business assets without paying CGT immediately. The tax is postponed until you eventually sell the new asset or another “CGT event” happens, like stopping business use.
You'll need to add half of your profit to your income for the year. Because your profit was $100,000, you'll report $50,000 as a taxable capital gain. Your personal tax rate is then applied to the total amount of income you reported to determine how much tax you owe.
How can I reduce capital gains taxes?
In the case where an asset is owned by a deceased person for longer than 12 months and then sold by a beneficiary, a 50% CGT discount would apply, effectively halving the taxable capital gain.
Typically, when you inherit an asset, capital gains tax will not apply. However, when you sell an asset that you have inherited, CGT may become relevant to any money you make from the sale of the asset.
6 options for passing down your home
No, there is no inheritance tax in Australia. This means you won't pay tax simply for receiving an inheritance—whether it's cash, property, or shares. However, that doesn't mean there are no tax consequences. Depending on what you inherit and how you use it, other taxes may apply.
Every individual has a basic Inheritance Tax (IHT) threshold of £325,000, known as the Nil Rate Band. Assets below this value generally pass to beneficiaries free of tax. If the estate is worth more than that, IHT at 40% usually applies on the excess, unless exemptions or reliefs reduce the amount due.
Take immediate steps to manage the property, such as addressing mortgage payments, property taxes, insurance, and utilities. Carefully consider whether to keep, sell, or rent the inherited house, especially if there are multiple heirs, and be aware of potential tax implications.
However, there is a little-known IHT loophole that does not have a set limit or post-gift survival requirement, known as 'Gifts for the Maintenance of Family'. Any gift that qualifies under this loophole is exempt from IHT. If HMRC decide that the gift was larger than reasonable, the reasonable part is still exempt.
Inherited property is a capital asset and for CGT purposes you acquire it on the day a person dies. CGT doesn't usually apply at the time you inherit the dwelling, however it will apply when you later sell or dispose of the dwelling, unless an exemption applies.
How to calculate capital gains
You can avoid capital gains taxes on inherited property by minimizing the time for appreciation. Selling immediately after inheritance typically results in minimal capital gains tax because there's little time for the property to appreciate beyond its stepped-up basis.
You may avoid CGT if:
Taxation on Selling an Inherited Property
(LTCG). This capital gain on the sale of ancestral property is taxed at 20.8% (including cess) with indexation and 12.5% without indexation. Also, LTCG upto Rs. 1.25 lakhs is exempt from capital gain tax under the Income Tax Act.