Deceased Estates – Full capital gains tax exemption if dispose of the pre-CGT property within 2 years from date of death
Did you know of the capital gains tax exemption available for the disposal of pre-CGT properties (originally acquired by the deceased before 20 Sep 1985) within 2 years from the deceased date of death?
“This exemption offers a valuable opportunity to avoid CGT on inherited pre-CGT property — provided the disposal happens within the two-year post-death window.”
Does the pre-CGT property have to have been the main residence at any time?
No it is not necessary for the pre-CGT property to have been the main residence of the deceased just before they died.
The deceased could have used the pre-CGT property to earn income so this capital gains tax exemption can also apply to investment properties.
“If the property inherited from a deceased estate is a pre-CGT asset, and is sold within two years of death, beneficiaries may qualify for a full CGT exemption.”
What do you mean by dispose of?
The Estate will need to have transferred out the property, either by selling to a 3rd party or transfers to the beneficiary (so they inherit as according to the will).
Further to this, if the beneficiary who inherits the property decides to sell the inherited pre-CGT property within 2 years, the capital gains tax on the disposal is also still fully exempt.
What do you mean by “settled”?
For this particular legislation for the capital gains exemption, the relevant date is the date the contract is fully settled and completed, which is the date the property transfer has been finalised and performed.
This is in contrast to the date of exchange of contracts which is normally relevant for the capital gains on the disposal of Real Estate assets, which is the date the contract is signed by the relevant parties.
If you have questions on any of the above issues raised, please do not hesitate to contact us.
Judy She
Senior Accountant
T: 02 9984 7774
E: judys@northadvisory.com.au
Martin van der Saag
Partner
T: 02 9984 7774
E: martinv@northadvisory.com.au
About the author
Cayle Petritsch - Director & Wealth Advisor
Cayle Petritsch, Director and Wealth Advisor, works with our existing clients who have recognised the importance of business owners making strategic financial choices not only for their company, but for their personal finances too.
Cayle saw a great opportunity to expand North Advisory’s services into SMSF/superannuation, personal wealth management, asset protection services and other crucial personal finance facets that business owners need to consider.
His approach to wealth management allows you to receive highly personalised wealth advice. Working closely with Marius, Cayle understands the unique needs of every client, from their lifestyle and business goals to their retirement plans.
Key Takeaways
Disposing of inherited pre-CGT property within two years can secure a full CGT exemption.
This offers a rare window for beneficiaries to realise value tax-free, provided timing and conditions are met.
Pre-CGT status is crucial — but must be preserved.
Major renovations or capital improvements after 1985 may void pre-CGT status, risking CGT on sale.
Delay beyond two years, or converting to rental/investment, can jeopardise the exemption.
Hold-period and use-type matter significantly in determining CGT liability.
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Frequently Asked Questions
What is a “pre-CGT property”?
A pre-CGT property is one acquired before 20 September 1985 — before the introduction of the Australian Capital Gains Tax regime. Such properties are generally exempt from CGT when sold.
Does inheriting a pre-CGT property automatically make it exempt from CGT when sold?
Not always. While pre-CGT status helps, to secure a full exemption under this rule the inherited property must be disposed of (sold) within two years from the date of death.
What happens if the property is not sold within the two-year window?
If the property is kept beyond two years — or converted into a rental or investment property — the beneficiary may lose the full exemption. In that case, a partial or full CGT liability may apply depending on use, ownership period, and value change.
Who qualifies for this exemption: beneficiaries or the estate’s legal personal representative?
Both beneficiaries and the legal personal representative (executor/administrator) may qualify — provided they sell the property within two years of death and meet the relevant conditions
Does the exemption apply if the property had substantial improvements after the original acquisition?
If the property has undergone major changes (e.g. significant additions or capital works) since the original pre-CGT acquisition, the property may lose its pre-CGT status, and the exemption could be invalid.
Can I get a full CGT exemption on a pre-CGT property if I sell it within two years of the owner’s death?
Yes — if I dispose of a pre-CGT asset (acquired before 20 September 1985) within two years from the date of the owner’s death, I can qualify for a full capital gains tax (CGT) exemption on that property under specific ATO rules. This means the sale may be tax-free provided it meets the timing and eligibility conditions set by the tax law.
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