Is a Property Windfall Subject to CGT?
Every now and again, life will present you with a nice surprise out of the blue in the form of a windfall. This may be money left to you in a will or testament, a win from the National Lottery or some other unexpected benefit. Sometimes, the surprise will come in the form of property, and while it may be tempting to spend the value of this windfall in your mind and make hasty plans to take advantage of your good fortune, you also have to consider any obligations associated with the event. In this case, do you need to account for capital gains tax and what are the rules associated?
Free of Tax?
Firstly, you need to consider your tax status in Australia. Most people in the country are liable to pay tax to the ATO on any earnings, but if the property was bequeathed to you in somebody's will, then generally speaking, it is free from any capital gains tax liability. You just need to prove that you received this windfall from the departed and can show that you were included in the will to make certain of your position. Foreign residents may not be able to take full advantage of this situation though and would need to seek further advice from an accountant.
Additional Questions
Now, if you want to flip the property and dispose of it right away to convert the value into cash, then the ATO may want to dig a little deeper. They will want to know whether the property was used for rental or other income-producing reasons in the recent past and this may prompt them to treat the case a little differently.
Correct Procedure
In many cases, the property will have been classified as a dwelling and may even have been the principal residence of the departed person. In this case, you may be able to sell the property after a reasonable amount of time but be careful that the building is not seen to be part of the estate's dissolution. If it is determined that its sale was completed by the executor of the estate, then capital gains tax may indeed be due.
Being Safe
Before you do anything else, talk with an experienced tax accountant first. You need to make sure that you follow the right procedure and especially if you want to convert the property into cash. After all, you don't want to end up with a big and unexpected tax bill. Call your local tax account services for assistance today.