If you’ve inherited a property, whether it is an investment or a residential property, quite often there are lots of factors to consider.

First things first.

Take a step back and breathe. Losing a loved one is emotionally traumatic, and decisions about the property in most cases, do not need to be made immediately, and certainly shouldn’t be made without specialist advice.

When you are ready to start considering options, here are some things to think about when you inherit a property:

What are my options?

There are three options of what to do with an inherited property:

• sell it
• live in it
• keep as an investment property.

Unfortunately, while there are only three options, life isn’t that simple.

There are also variances to the three scenarios you may want to consider. For instance, you may decide to keep it as an investment property, earn an income and then sell it later down the track. Or live in it and a few years later, use it as an investment property, or sell it.

Furthermore, if there are siblings or other named people in the Will, there will need to be a unanimous decision on what to do with the property. Alternatively, you may consider buying the other beneficiaries out of their share, or vice versa.

If you are buying the other beneficiaries out of their share, you will of course have to raise the finance to do so.

Tax issues to consider

The main thing you need to consider is whether the property is exempt or whether you will need to pay partial or full capital gains tax (CGT). And it’s at this point it may get complicated!

CGT is dependent on a number of factors including when the property was originally purchased and how the property was used (ie was it a residential or an investment property?). Another factor is how long you hold the property before it is sold.

For instance, if the property was purchased before 20 September 1985 (the date that CGT was introduced) and you sold it within two years, then the property is fully exempt from CGT.

If the property was purchased after 20 September 1985, and you acquired the investment property after 20 August 1996, then a full CGT exemption won’t be available.

You may find helpful the information on the ‘Inherited Property and CGT’ page on the ATO website. It outlines several scenarios in a number of ‘yes’ ‘no’ questions.

If you are considering keeping the property for investment purposes, you will also need to factor in how rental income will affect your current income and your tax return. There are of course tax-deductible benefits associated with an investment property. Visit the ATO website to find out more.

For more information about being a landlord in NSW, visit the Information for tenants, landlords and agents on renting section on the NSW Government Fair Trading website.

What should I do?

While you may have a particular scenario in mind, we strongly recommend you speak to an accountant or another financial specialist before you make any decision. They will explain what the financial impact of each option is for you, and what else you need to consider, such as should you decide to keep the property as an investment, what expenses are tax deductible.

If you have inherited a property and want to know how our management services or sales team can help you, come and talk to us.

As one of Newcastle’s longest established real estate offices, we know property. Whether it is from an investment or homeowner’s point of view, we’re always looking at innovative ways to help you get the best from your asset.

Drop into the Cardiff office or give us a call on 02 4956 9777. Or send us an email at mail@newcastlepropertymanagement.com.au – we’d love to help you realise your financial dreams through property.