If you acquire a dwelling the deceased had owned, there are special rules for calculating your cost base.
These rules apply in calculating any capital gain or capital loss when a CGT event happens in relation to the dwelling.
The first element of the cost base and reduced cost base of a dwelling – its acquisition cost – is its market value at the date of death if either:
- the dwelling was acquired by the deceased before 20 September 1985, or
- the dwelling passes to you after 20 August 1996 and it was the main residence of the deceased immediately before their death and was not being used to produce income at that date.
In any other case, your acquisition cost is the deceased's cost base and reduced cost base on the day they died. If that cost base includes indexation you must recalculate it to exclude the indexation component if you prefer to use the discount method to work out you capital gain from the property.
If you are a beneficiary, the cost base and reduced cost base also includes amounts that the trustee of the deceased's estate would have been able to include in the cost base and reduced cost base.