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If 2 or more people acquire a property asset together, it can be either as joint tenants or as tenants in common.
If one of the joint tenants dies, their interest in the property passes to the surviving joint tenant(s). It is not an asset of the deceased estate.
If a tenant in common dies, their interest in the property is an asset of their deceased estate. This means it can be transferred only to a beneficiary of the estate or be sold (or otherwise dealt with) by the legal personal representative of the estate.
For CGT purposes, if you are a joint tenant, you are treated as if you are a tenant in common owning equal shares in the asset. However, if one of the other joint tenants dies, on that date their interest in the asset is taken to pass in equal shares to you and any other surviving joint tenants, as if their interest is an asset of their deceased estate and you are beneficiaries.
The cost base rules relating to other assets of the deceased estate apply to their interest in the asset or the equal share of it which passes to you and any other surviving joint tenants.
For the indexation and discount methods to apply, you must have owned the asset (or your share of it) for at least 12 months. As a surviving joint tenant, for the purposes of this 12-month test, you are taken to have acquired the deceased's interest in the asset (or your share of it) at the time the deceased person acquired it.
CGT and joint tenants
Trevor and Kylie acquired land as joint tenants before 20 September 1985. Trevor died in October 2001. For CGT 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 qualify for the CGT discount on any capital gains she makes on her post-CGT interest. She qualifies for the CGT discount because, for the purposes of the 12-month ownership test, she is taken to have acquired Trevor's interest at the time when he acquired it, which was before 20 September 1985.
Last modified: 06 Oct 2009QC 27417