Capital gain or capital loss on death disregarded

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There is a general rule that CGT applies to any change of ownership of a CGT asset, unless the asset was acquired before 20 September 1985 (pre-CGT).

There is a special rule that allows any capital gain or capital loss made on a post-CGT asset to be disregarded if, when a person dies, an asset they owned passes:

• to their legal personal representative or to a beneficiary, or
• from their legal personal representative to a beneficiary.

Exceptions to this rule

A capital gain or capital loss is not disregarded if a post-CGT asset owned at the time of death passes from the deceased to a tax-advantaged entity or to a non-resident. In these cases, a CGT event is taken to have happened in relation to the asset just before the person dies. The CGT event will result in:

• a capital gain if the market value of the asset on the day the person dies is more than the cost base of the asset or
• a capital loss if the market value is less than the asset's reduced cost base.

A 'date of death return' should be lodged (for the period from the start of the income year to the date of the person's death) showing any capital gain or capital loss. It is the trustee of the deceased estate, not the beneficiary, who pays tax on any net capital gain.