Question:
My spouse and I owned an investment property in joint names until my partner’s death 10 years ago, when I became sole owner. The property was sold last year. The property was not our main home. Do I have to pay capital gains tax on the half I inherited?
Answer:
If the property was bought after 1985 and was always rented, then it is subject to capital gains tax from the time it was bought.
You would have inherited your spouse’s cost base, that is all the costs of purchase, which presumably would have been identical to yours.
If it was bought before 1985, then your half share would be an untaxed pre-85 asset.
However, the half you inherited 10 years ago will now be a post-85 asset, subject to CGT, with its cost base being the market value at the time of your partner’s death.
Be sure to include in your cost base all the relevant costs of buying the property, including fees for lawyers, accountants, valuers, builder’s report, etc.
Add to these any capital costs of building improvements carried out over the period that it was a post-85 asset.
Similarly, when selling, be sure to reduce the gross profit by lawyers, accountants and agents fees, etc.
I would strongly suggest you use a qualified tax accountant.