Capital Gains Tax (CGT) is not payable as a result of your death, but your beneficiaries pay CGT if it is applicable, when they sell the assets they have inherited. They inherit your cost base if you acquired the asset on or after 20 September 1985. If you acquired it before that date, your cost base is the value of the asset as at the date of your death.
This means that it is very important that you keep a record of the cost base of any asset you acquired on or after 20 September 1985. It could be very difficult for your beneficiaries to determine this cost base after your death, if you have not kept a proper record.
In the main, and provided that your home is properly 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 quite technical, but in essence you need a proper record of when they were purchased, the cost inclusive of stamp duty and legal costs, and 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 main real estate), then you need to have it documented in an Assets Register. If you don’t have an Assets Register, then we can prepare one for you.
Having everything properly 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 – this article has been produced by Kreston Stanley Williamson as a service to 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 contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.