If you were particularly close to someone during the later stages of their life, you may have been named in their will and now stand to acquire a significant property as part of their estate distribution. However, you may not have been used to owning something so substantial in the past and may not know how to proceed. In particular, you may be worried about your tax obligations when it comes to capital gains. In this situation, what should you do next?

Green Light

If you plan on keeping this property for your own use, then you won't have to worry about any capital gains tax exposure. Usually, a property that is bequeathed to a beneficiary in this way is exempt, so long as they are a native Australian (as there are other rules that may relate to foreign residents). Thus, you may choose to renovate the property and live in it or rent it out for other commercial gains.

Analysing Your Plans

However, if you would rather use the value of the building for some other activity, then you may be thinking about putting it up for sale as soon as possible. This may move the property into another category, however, and the ATO may be interested in raising some tax as a consequence. Much will depend on the nature of the property prior to your acquisition, especially if it was previously used for producing income.

Careful Timing

Time is of the essence here as there are some guidelines laid down that may affect the outcome. You need to determine whether the person who left you the building actually used it as their main residence. Also, you need to be careful when you actually sell it, if this is what you decide to do.

Knowing the Rules

Furthermore, different rules may apply to the property if it was used as a dwelling versus as another structure on the land, or even to the land itself. Ordinarily, capital gains tax would become due if the property was sold during the estate execution, although this is not applicable in your case.

Being on the Safe Side

It's always best to find out where you stand before you do anything with this newly-acquired property. Talk with a tax agent who is familiar with all the rules, so you know exactly where you stand with the authorities and avoid any potential grey areas. If you're careful, you'll be able to enjoy the benefits of your windfall and plan your tax strategy carefully.