It is crucial to consult a tax accountant to effectively navigate your beneficiaries’ Capital Gains Tax (CGT) obligations upon your passing. When your beneficiaries sell the inherited assets, they may be liable to pay CGT if applicable. If the asset were acquired on or after 20 September 1985, your beneficiaries would inherit your cost base. However, for assets acquired before that date, the cost base would be determined by the asset’s value at your death. Seek expert guidance from a tax accountant to gain comprehensive insights into CGT obligations and inheritance matters.
This means that it is essential that you keep a record of the cost base of any asset you acquired on or after 20 September 1985. If you have not kept a proper record, it could be difficult for your beneficiaries to determine this cost base after your death.
In the main, provided that your home is adequately dealt with, there should be no CGT on its sale after your death.
Other assets acquired after 20 September 1985 are not so easy. It is somewhat technical, but in essence, you need a proper record of when they were purchased, the cost inclusive of stamp duty and legal costs, and the costs of any improvements made.
If acquired after 20 August 1991, you can also add to your original purchase cost (if not already claimed as a tax deduction against rental income) costs such as interest on borrowings, insurance, repairs and maintenance, rates and land tax.
Any capital improvement after 20 September 1985 to a pre-CGT asset is treated as a separate CGT asset, and if its value exceeds an indexed amount which is $140,443 for 2014/2015 (when the pre-CGT asset is sold), then it is subject to CGT.
If you believe that you have an asset to which the above might apply (in leading real estate), then you need to document it in an Assets Register. If you don’t have an Assets Register, we can prepare one for you.
Having everything adequately documented now will mean that your beneficiaries are not left with a complicated, messy and potentially expensive task ahead of them. So please give us a call if you’d like us to discuss this with you further.
*Correct as of September 2015
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
