Please Help - Anyone Knows about Capital Gains Tax on Inheritance?

pandabear on 16/08/2017 - 09:04
Last edited 16/08/2017 - 09:04

I have a few questions in relation to inheritance and how CGT is applied. I have tried to do some research but have found conflicting information on the internet. So I am hoping to get some clarification either from people who have personally gone through this or are subject matter experts in this field.

My parents own 3 properties (2 in Victoria and 1 in ACT). They are separated but not divorced. 1 property is in my Mum's name which she lives in, another property is in my Dad's which he lives in. Plus a third investment property which they own jointly. They also own a share portfolio. All properties and shares were purchased after 1985.

So based on the Australian State and Federal rules do you know how the following will be treated when they pass away and my sister and I inherit their properties and shares?

1) Will we have to pay Capital gains tax if we sell these 3 properties within 2 years of them passing away? Is the investment property treated any differently?

2) If we choose to not sell the properties within 2 years and decide to sell them at a much later date, to work out CGT will the cost base be the market value of the property on the date we inherited them or will the cost base be the purchase price my parents paid for them? Is the investment property treated any differently?

3) if we sold the shares, to work out CGT will the cost base be the market value of the shares on the date we inherited them or will the cost base be the purchase price my parents paid for them?

4) Will we have to pay stamp duty for the title of the properties to be changed to our names?

5) Does the answer to the above questions vary whether they have a Will or not?

Thanks again Ozbargain for your help!

Financial

Comments

  • oscargamer on 16/08/2017 - 09:17
    +3

    Talk to an accountant or the ATO.

    The ramifications of getting the wrong advice are WAY too big.

    Also, rules change. What might be the case today, isn't necessarily the case in a year or ten years etc….

  • pandabear on 16/08/2017 - 09:23

    That's the thing - I called the ATO yesterday and two different people told me 2 different things. And 2 different accountants have told me conflicting information too!

    • phaol7ta on 16/08/2017 - 09:29
      +1

      and hundreds of people here will tell hundreds different thing too. Stick with the ATO, as in the end they re the one who is get the money.. good luck

      • pandabear on 16/08/2017 - 09:37

        I know… was just hoping to hear from people who may have had first hand experience..

        • retiredfeline on 16/08/2017 - 09:48
          +1

          That's even worse because other people's circumstances will differ in small but crucial ways. You'd be better off starting by reading the documents on the ATO website about this, and there is even one with a flowchart, then discussing with the ATO. And note any records the owner may need to keep for later valuation.

  • rompastompa on 16/08/2017 - 09:49

    Are you calculating how much you would get if they had an "accident"?

    Are you organizing a "skiing trip" for them to rekindle their relationship, too? Pm iwantthatflight for a bargain.

    • pandabear on 16/08/2017 - 09:55
      +1

      Actually my parents asked me to find out for them to assist in their decision making whether to sell up now or leave the properties to us when they pass away.

  • kipps on 16/08/2017 - 09:50

    Take proper taxation and legal advice. These can be complex issues, and it is simply not something that should, or could, be addressed on OzBargain.

    There can often be ways of minimising taxation consequences dependent upon how the will and resultant estate is structured.

    For example, proper advice may be to have the properties placed into a testamentary trust, and then income can be distributed out of that trust without the need for sale of the properties.

  • mskeggs on 16/08/2017 - 10:03

    You can get an official, binding written ruling from the ATO, but it will only be valid as long as circumstances don't change (and they will tend to see things from their point of view, not necessarily the most advantageous interpretation for yourself).
    For example, what happens to the investment property after the first parent dies?
    Another option is to get an official, professional opinion from a tax lawyer.
    They will state what they understand to be the case with varying degrees of authority (in this case, very high confidence, I would think) and you are entitled to sue them for your losses if their opinion turns out to be in error.

    My understanding is the shares and investment property will be subject to CGT from the date purchased. The principle places of residence will not be liable to CGT if sold within 2 years.
    My assumption is if you hold the principle places of residence properties long term the CGT date is when you inherit, although I can't find a firm citation of this.
    But I am barely competent to post on the Internet, so my tax advice is worth what you pay for it.

  • ihbh on 16/08/2017 - 10:16

    Why are you in such a rush to find out?

    • pandabear on 16/08/2017 - 10:20

      Like I said above - my parents asked me to find out for them to help them decide wether to sell now or hold onto their assets. I am in no hurry to inherit anything we have our own house already and are financially capable on our own.

  • djkelly69 on 16/08/2017 - 10:42
    +1

    Speak to someone who specialises in estate planning or similar. Not only will they know the answers to your questions, but could also suggest other more tax-effective ways to deal with it all (trusts, etc).

    • pandabear on 16/08/2017 - 10:43

      Can you recommend anyone?

      • djkelly69 on 16/08/2017 - 10:45

        It will usually be an accountant/financial planner working in conjunction with a lawyer. I don't have any specific recommendations.

  • Ocker on 16/08/2017 - 10:43

    From memory the date of death is the CGT determining date. After the date of death the CGT calendar starts again

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