What Your Heirs Inherit Along With the Asset
Death is generally not a capital gains tax event. The asset passes to the beneficiary at the deceased's cost base and with the deceased's acquisition date, which means the unrealised gain travels with it and is taxed when the beneficiary eventually sells. Two exceptions matter: assets acquired before September 1985, and a main residence.
- The answer: For a post-September-1985 asset, the beneficiary inherits the deceased's cost base and acquisition date, and the CGT event happens when they sell.
- The trap: The inherited acquisition date is what qualifies them for the discount, which is helpful, but the inherited cost base can be decades old and very low.
- The recommendation: Keep the purchase records. A beneficiary cannot calculate a gain without the original cost base, and reconstructing it thirty years later is expensive.
Where the AI summary above gets this wrong
"When you inherit shares or property, the cost base is reset to the market value at the date of death."
That's surface-true. Here's what it misses:
- That is true only for assets acquired before 20 September 1985 — For everything acquired after that date the beneficiary inherits the deceased's original cost base, and the unrealised gain passes with the asset.
- The acquisition date passes across too — That is favourable, because it means the beneficiary meets the twelve-month holding period for the CGT discount immediately rather than having to wait a year.
01 The general rule
Transferring an asset to a beneficiary on death does not trigger capital gains tax. The asset passes at the deceased's cost base, and the beneficiary is treated as having acquired it on the date the deceased did.
Inheriting the acquisition date matters more than it sounds. It means the beneficiary satisfies the twelve-month holding requirement for the 50% CGT discount immediately, so a sale shortly after inheriting still qualifies.
The inherited cost base is the unfavourable half. Shares bought in 1994 carry a 1994 cost base, so a beneficiary selling them realises three decades of gain in one income year at their own marginal rate.
Source: ATO — Capital gains tax
02 The two exceptions
Assets the deceased acquired before 20 September 1985 are inherited at their market value on the date of death. Capital gains tax did not exist before that date, so the gain up to death is never taxed and the beneficiary starts fresh.
A dwelling that was the deceased's main residence is the second. Where the beneficiary sells within the specified period after death, or where the dwelling was the main residence of an eligible occupant until the sale, the gain can be fully exempt.
Both exceptions have conditions and both reward acting within a defined period. Executors who leave a property unsold beyond the window can convert a fully exempt sale into a partly taxable one without anyone intending it.
Shows: the capital gains tax a beneficiary pays on selling an inherited asset, using the deceased's cost base and the discount the inherited acquisition date qualifies them for. Ignores: the pre-1985 market value rule, the main residence exemption, selling costs, capital improvements, and any capital losses the beneficiary holds.
Source: ATO — CGT discount
03 What actually goes wrong
Records are the practical failure. A beneficiary needs the original purchase price, the date, and every capital improvement and cost since, and those documents are usually in the deceased's papers if they exist at all.
Dividend reinvestment plans compound the problem. Each reinvested dividend is a separate parcel with its own cost base and date, so a holding built up over twenty years of reinvestment is dozens of parcels rather than one.
The remedy is unglamorous: keep a single file of purchase contracts, holding statements and improvement receipts, and tell the executor where it is. It costs nothing now and saves a beneficiary an expensive reconstruction later, which is the same argument made for the main residence valuation in the main residence reference.
The file of purchase contracts is the most useful thing you can leave alongside the assets, and almost nobody does it. Without it your beneficiary is reconstructing a cost base from bank statements and share registry archives, and where they cannot, the safe assumption they end up using is the one that costs them the most tax.
FAQ
How is the cost base of inherited shares and property worked out for my heirs?
For assets acquired after 19 September 1985 the beneficiary inherits the deceased's cost base and acquisition date, so the unrealised gain passes with the asset. Assets acquired before 20 September 1985 are inherited at market value at the date of death.
Do my beneficiaries get the CGT discount straight away?
Yes. They inherit the deceased's acquisition date, which satisfies the twelve-month holding requirement immediately, so a sale shortly after inheriting still qualifies for the discount.
What happens to an inherited main residence?
The gain can be fully exempt where the beneficiary sells within the specified period after death, or where the dwelling remained the main residence of an eligible occupant until the sale. Missing the window makes the sale partly taxable.
Sources
Regulator references
- ATO — Capital gains tax · Australian Taxation Office · 2026Capital gains tax: the events that trigger it and how the gain is worked out.Last verified: 2026-09-07
- ATO — CGT discount · Australian Taxation Office · 2026The CGT discount on assets held beyond the qualifying period, and who can claim it.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.