When someone dies and their estate includes property, the executor and beneficiaries face an immediate question: what was the property worth at the date of death? The answer determines the cost base for capital gains tax when the property is eventually sold, the value of the estate for probate and distribution purposes, and in some cases, whether the property qualifies for a full CGT exemption.
This guide explains when a date-of-death property valuation is required, how CGT applies to inherited property, the two-year main residence exemption, the critical difference between pre-CGT and post-CGT properties, and how retrospective valuations work when the valuation was not obtained at the time of death.
When is a date-of-death valuation required?
Not every inherited property requires a formal valuation at the date of death, but many do. The key factors are when the deceased acquired the property and how it was used.
Pre-CGT property (acquired before 20 September 1985)
If the deceased acquired the property before the introduction of CGT on 20 September 1985, the cost base for the beneficiary resets to the market value at the date of death. This is a mandatory reset, and without a valuation, the beneficiary has no defensible cost base when they sell. A date-of-death valuation is essential for pre-CGT inherited properties.
Post-CGT property (acquired on or after 20 September 1985)
If the deceased acquired the property after CGT began, the beneficiary generally inherits the deceased’s cost base (the original purchase price plus eligible costs and improvements). In this case, a date-of-death valuation may not be strictly required, because the cost base is already established. However, there are important exceptions where the cost base resets to market value at date of death. These apply when the property was the deceased’s main residence and was not being used to produce income just before death, or when the property passes to a beneficiary after 20 August 1996 under certain conditions set out in the ITAA 1997.
In practice, obtaining a date-of-death valuation is advisable for all inherited properties because the CGT rules are complex, the property may qualify for a cost base reset that the executor is not initially aware of, and the valuation provides the executor and beneficiaries with a documented value for estate distribution, regardless of CGT treatment.
The two-year main residence exemption
If the inherited property was the deceased’s main residence and was not being used to produce income just before death, selling it within two years of the date of death can qualify for a full CGT exemption. This applies whether the beneficiary lived in the property during the two-year period or not, and even if they rented it out during that time.
If the sale settles within two years of death and the exemption conditions are met, CGT is zero, and the date-of-death valuation is not needed for CGT purposes (though it may still be needed for probate and distribution).
If the sale settles after two years, or if the conditions for the exemption are not fully met (for example, the property was partly used for income, or the deceased was a foreign resident), a partial exemption or no exemption may apply, and the date-of-death valuation becomes critical for the cost base calculation.
The ATO has discretion to extend the two-year period in circumstances outside the beneficiary’s control (for example, delays in obtaining probate, legal disputes over the will, or natural disasters affecting the property). A request for extension should be made before the two-year period expires.
How CGT is calculated on inherited property
| Deceased Acquired | Cost Base for Beneficiary | Valuation Needed? |
|---|---|---|
| Before 20 Sep 1985 (pre-CGT) | Market value at date of death | Yes, always |
| After 20 Sep 1985 (post-CGT), main residence, not income-producing | Market value at date of death | Yes (cost base resets) |
| After 20 Sep 1985 (post-CGT), investment property | Deceased’s cost base (purchase price + improvements) | Advisable (for estate distribution and as a protective measure) |
| Any date, sold within 2 years, main residence exemption applies | N/A (full exemption, no CGT) | Not for CGT, but may be needed for probate |
For the 50% CGT discount, the beneficiary is treated as having acquired the property when the deceased acquired it (not at the date of death). This means the 12-month holding period is almost always satisfied for inherited properties.
What executors and solicitors need to know
As the executor or legal personal representative (LPR), you are responsible for valuing the estate’s assets for probate purposes and for ensuring accurate CGT reporting. The practical steps are:
Step 1: Identify whether a valuation is needed. Check when the deceased acquired the property and how it was used. If in doubt, get the valuation. The cost ($245 for residential) is trivial relative to the estate’s value, and having the valuation on file protects both the executor and the beneficiaries.
Step 2: Order the valuation as at the date of death. The valuation should be as at the exact date of death, not the date you discovered the property needed valuing. If the death occurred months or years ago, a retrospective valuation is the solution.
Step 3: Keep the valuation report with the estate records. The beneficiary will need it when they eventually sell the property, which could be years or decades later. A valuation report obtained at the time of death is always stronger evidence than a retrospective one obtained years later.
Step 4: Consider the two-year window. If the property qualifies for the main residence exemption and the beneficiary can sell within two years, this may be the most tax-effective outcome. The date-of-death valuation helps the beneficiary assess whether to sell now (CGT-free) or hold (CGT applies on future gains above the date-of-death value).
Retrospective date-of-death valuations
If the death occurred months or years ago and no valuation was obtained at the time, a retrospective valuation can establish the market value as at the date of death. The valuer uses comparable sales evidence from the period around the date of death, assessed against the property’s characteristics as they existed at that time.
Retrospective date-of-death valuations are common. Estates often take months or years to administer, and the need for a valuation may only become apparent when the beneficiary decides to sell. We prepare retrospective valuations for any past date, at the same price as current-date valuations: $245 residential, $550 commercial.
Costs that can be added to the cost base
In addition to the market value at the date of death (or the deceased’s cost base for post-CGT investment properties), the following costs incurred by the executor or beneficiary can be included in the cost base:
- Legal fees for administering the estate (solicitor costs for probate, defending the will against challenges)
- Valuation fees (including this valuation)
- Stamp duty or transfer fees on the transfer to the beneficiary
- Capital improvements made by the beneficiary after inheriting the property (not repairs or maintenance)
These additions reduce the eventual capital gain when the property is sold, so keeping records of all estate administration costs is important.
Need a date-of-death property valuation for a deceased estate?
Independent desktop valuations as at any date, including retrospective date-of-death valuations for estates. Residential $245 | Commercial $550. Delivered within 48 hours, all Australian locations.
Estate property held outside superannuation is a capital gains tax matter. Our sister brand CGT Valuations prepares deceased estate valuations as at the date of death, which is the date that sets the beneficiary’s cost base.
Frequently asked questions
For pre-CGT properties (acquired before 20 September 1985), yes, a date-of-death valuation is essential because it becomes the cost base for CGT. For post-CGT properties, it depends on the circumstances, but obtaining a valuation is always advisable as a protective measure and for estate distribution.
If the property was the deceased's main residence and was not being used to produce income just before death, selling within two years of the date of death qualifies for a full CGT exemption. Settlement must occur within the two-year period.
A retrospective valuation as at the date of death can be prepared using historical comparable sales data. We prepare retrospective valuations for any past date at the same price as current-date valuations.
For post-CGT investment properties, generally yes. For pre-CGT properties, no. The cost base resets to market value at the date of death. For post-CGT main residences, the cost base may also reset to date-of-death market value depending on the circumstances.
Yes. Legal fees for probate and estate administration, valuation fees, stamp duty on transfer to the beneficiary, and capital improvements made after inheriting can all be included in the cost base.
If the deceased was a foreign resident at the time of death, or the beneficiary is a foreign resident, the main residence exemption may not be available, and the CGT discount may be reduced or eliminated. A date-of-death valuation is even more important in these circumstances, as the full CGT calculation will depend on it.
Either can order it. Ideally, the executor obtains the valuation as part of estate administration and includes it in the estate records provided to the beneficiary. If the executor did not obtain one, the beneficiary can order a retrospective valuation when needed.
