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If 2 or more people acquire an asset together, it can be either as joint tenants or as tenants in common.
At general law, if you are a joint tenant and you die, your interest in the property passes to the surviving joint tenant or tenants. It is not an asset of your deceased estate.
At general law, if you are a tenant in common and you die, your interest in the property is an asset of your deceased estate and can only be transferred to a beneficiary of your estate or be sold or otherwise dealt with by the legal personal representative of your estate.
For capital gains tax purposes, joint tenants are treated as if they are tenants in common owning equal shares in the asset. However, for CGT purposes your interest in the asset is taken to pass, on the date you die, to the surviving joint tenants in equal shares as if your interest is an asset of your deceased estate and as if they are beneficiaries.
The cost base rules applicable to other assets of your deceased estate apply to the interest in the asset or the equal share of it which passes to the surviving joint tenants.
The surviving joint tenants are taken, for the purposes of applying the indexation rules and the CGT discount 12-month ownership rules, to have acquired the interest in the asset or their share of it at the time you acquired it.
Capital gains as joint tenants
Trevor and Kylie acquired land as joint tenants before 20 September 1985. Trevor died in October 1999. For capital gains tax purposes, Kylie is taken to have acquired Trevor's interest in the land at its market value at the date of his death. Kylie holds her original 50 per cent interest as a pre-CGT asset, and the inherited 50 per cent interest as a post-CGT asset which she is taken to have acquired at its market value at the date of Trevor's death. If Kylie sold the land within 12 months of Trevor's death, she would not qualify for the CGT discount on any capital gain she makes on her post-CGT interest because she did not own that interest for at least 12 months. Neither would Kylie's post-CGT interest qualify for indexation because she acquired it after 21 September 1999 - that is, on Trevor's death.
Last modified: 18 Sep 2009QC 18323