Leaving property to your children is something most families leave unsaid until it is too late to ask. I have watched good portfolios built over forty years go to the next generation with no plan, no explanation and a tax bill nobody saw coming.
How the property passes
How a property is owned decides where it goes. Owned by a couple as joint tenants, it passes to the survivor automatically, outside the will. Owned as tenants in common, each share passes under its owner’s will. Held in a trust or a company, the trust deed or the company’s shares decide. A will that does not match the ownership can leave the family surprised.
The tax that follows it
Death itself does not trigger capital gains tax on an investment property. The tax follows the property. Generally the person who inherits takes on the deceased’s cost base, and the gain is taxed when they sell. If the home was the deceased’s main residence, a sale that settles within two years of the death is generally exempt. A property bought before 20 September 1985 is treated differently again, though gains on it after 30 June 2027 are taxed.
The 2026 rules and inheritance
A second law passed in August 2026 lets a spouse who inherits a property, or someone who inherits more of a property they already part-owned, keep the old negative gearing rules. A child who inherits an established investment property outright, with no share before, is not covered. How the 2027 rules then apply is a question for an accountant before the will is written, not after.
A widower leaves two investment properties equally to three adult children. One wants to keep them, one wants the money, and one lives overseas. Nobody knew the cost bases, the loans or the tenants' leases. Two years of argument and two forced sales later, the family has less than it would have had with one conversation while he was alive.
The conversation worth having
- What is owned, how, and with what loans?
- Who in the family wants to keep property, and who would rather sell?
- Does the will match how the properties are owned?
- Where are the records an executor will need?
None of this is about dying. It is about making sure what you built does for your family what you meant it to.
Nicholas Lockhart
General information only. No advice is given. Estate law differs by state; a solicitor and an accountant can confirm what applies to your family.
Source: ATO, Inherited property and CGT (updated 22 June 2026); Treasurer, media release, 19 August 2026.