A friend has recently taken ownership of her parent's house after they passed away. She owns half of the property ($200 000) and paid out her sister's half hence she also has a $200 000 loan on the property now. She was looking at selling this, what tax would be paid on the selling of the property? Is she going to pay CGT on all or part of the sale? Hope this makes sense… any help would be wonderful. I have suggested holding onto the property but she is wants to sell.
Get your solicitor/accountant to confirm it but I would assume that there is no cgt on your inherited portion if you sell it within 12 months. There is cgt payable on the remainder which you bought (your sister is cgt exempt within the first 12 months). You may be better off waiting the 12 months and paying cgt on 50% at your MRT – do the calcs.
Hi Debden,
Was the property bought before the 20th september 1985? If it was that means it was a pre-CGT asset which means that if you sell the property within 2 years of death or the inherited property was used by your friend as the main residence from the date of the deceased death until when it was sold by your friend then you do not have to pay any CGT regardless whether the property was used as IP before the death of deceased.
If the Pre CGT asset was not sold after 2 years then CGT would apply, but the cost base will be the market price at the date of death of the deceased.
However if it was purchased after the 20th Sept 1985 and the property was purchased as Investment Property and earn rental income all along then your friend would not qualify to get main residence exemption and will inherit the deceased cost base to determine the Capital Gain.
If the property was used as a main residence before death and was purchased after the 20th Sept 1985, then if it was sold within 2 years and the dwelling was used as main residence by the beneficiary, then the beneficiary would be exempt from CGT.
Hope that Helps.Thomas Ho
"If it is to be, it is up to me"
The property was purchased by my friends mother before 1985 and was used as her mothers PPOR for the entire time untill she passed away earlier this year. In September of this year my friend bought her sister's share of $200 000 meaning she has a loan of $200K on a property worth $400K. It is currently being rented out. My understanding of tax (very basic knowledge) is that she will have to pay CGT on the $200K as this will be her profit from the sale.??????
No, debden, she definitely wouldn't pay CGT on the $200K!
What Thomas is saying is that if she sells the property within 2 years of her mother's death, there is no CGT payable, regardless of whether it's rented out now or not.
If she holds it for longer than 2 years, she'd only pay CGT on 50% of the increase in value from the date of death, ie on the excess over $400K. So if she sells in 3 years for $500K, she'd have an assessable capital gain of $100K, of which 50% is exempt, so she'd pay CGT on $50K, which is probably only about $15 or $20K tax, depending on her marginal tax rate at that time.
Hope that helps clarify things!
Regards,
Tracey
Thanks everyone for the info…helps her out alot. She is able to breath a bit easier knowing she wont pay huge amounts for CGT. Unfortunately she still wont think about holding onto the property which is in a growing area of the Gold Coast and has a large block size…Once again thanks all for the advice.
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