INHERITANCE QUANDARYNine months ago, I received a small inheritance from my father's estate in Britain. I am on the age pension and informed Centrelink, who reduced my pension. Will I have to complete a tax return for the 2012 financial year and pay tax? I do not normally pay any tax and no tax is payable to Inland Revenue in Britain on inheritance. D.H.As you receive an age pension, you will need to submit a tax return (by October 31) if your income in 2011-12 was more than $30,451 if you were single, widowed or separated at any time during the year or $24,823 if you lived with your spouse for the full year or $29,490 if you had a spouse but had to live apart due to illness.For those with more complex finances, these thresholds are not simply comprised of assessable income but also, added to this, deductible super contributions, any net financial or rental property losses plus adjusted fringe benefits, the sum of which are called your "rebate income". If in doubt, Google "ATO Do you need to lodge a tax return? 2012"GRANNY FLAT TAX POSERMy wife and I have lived in our current home since 1976, but in 1987 we built a two-bedroom unit (granny flat) for my parents in our backyard under the Victorian "dual occupancy" rule. Apart from a period of about 18 months in 2002-03 when it was rented out following the death of my parents, the unit has always been occupied by family members. As far as I can ascertain, the property (house and unit) is still on the one title. Initially, we paid two council rates, until some five to six years ago, in one of the council re-valuations, it was consolidated into just the one rate. We are now contemplating selling and moving to a smaller house or unit. I'm wondering if we would be liable for capital gains tax (CGT)? We are hoping to put any money saved in this move into our superannuation fund while we still can as we're both coming close to retirement age. P.L.Your granny flat is a post-1985 capital improvement to your pre-1985 property and has been used for income-producing purposes, so some CGT would be assessable. You might have an argument that the flat forms part of your principal place of residence, although it is apparently a separate structure, and whether that would sway the ATO depends on the facts of the case. You will need to talk to a tax accountant and possibly seek a private ruling.If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Financial Ombudsman, 1300 780 808 pensions, 13 23 00.
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