Cost bases, unapplied net capital losses, and life and remainder interests

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Cost to you of acquiring the dwelling

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 capital gains tax (CGT) event happens to the dwelling.

The first element of the cost base or reduced cost base of a dwelling – its acquisition cost – is its market value at the date of death if:

  • the dwelling was acquired by the deceased before 20 September 1985,
  • the dwelling passes to you after 20 August 1996 (but not as a joint tenant) and it was the main residence of the deceased immediately before their death and was not being used to produce income at that date, or
  • the dwelling passes to you as the trustee of a Special Disability Trust.

In any other case, the acquisition cost is the deceased's cost base or reduced cost base on the day they died. You may need to contact the trustee or the deceased’s recognised tax adviser to obtain the details. 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 your capital gain from the property.

If you are a beneficiary, the cost base or reduced cost base also includes amounts that the trustee of the deceased's estate would have been able to include in the cost base or reduced cost base.

Unapplied net capital loss

If the deceased had any unapplied net capital losses when they died, these cannot be passed on to you, as the beneficiary or legal personal representative, for you to offset against any net capital gains.

Life and remainder interests

There may be capital gains tax (CGT) consequences on the creation, surrender, expiry or disposal of a life interest or remainder interest.

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    Last modified: 17 Aug 2016QC 17195