Capital Gains Tax Implications when selling a property in a Deceased Estate

A dwelling such as a house or home unit may be completely exempt from capital gains tax provided that certain conditions are fulfilled. (This tax exemption does not apply to commercial, industrial or retail properties.)

In many cases – but not all – the main condition is that the property be sold within two years after the date of death. This two year limit may be extended if, after the date of death, the property is used as the main residence by:


(a) the spouse of the deceased, or


(b) a beneficiary, or


(c) another person entitled to occupy the property under the terms of the will.


The property must not be used to produce income. The exemption is extended for as long as the property is occupied by this person.


If the property qualifies as a "dwelling" and was purchased by the deceased person before capital gains tax was introduced (ie before 20 September 1985), the minimum two year exemption applies even if the property was not the deceased's main residence: it also applies to a residential investment property.


However, if the deceased purchased (or inherited) the dwelling after that date, the exemption only applies if the property was the deceased's main residence at his or her date of death. (If the deceased had moved into a nursing home prior to his or her death, the property may still be his or her main residence for capital gains tax purposes.)


The above is only a very general and simplified outline of the capital gains tax rules. The rules are complex and expert advice should be taken before deciding on the timing of a sale of a deceased estate property, and before taking other steps such as letting the property out.