After the death of his father, Ken is helping his mother put financial assets in her name and has some queries about shareholdings. A specialist in this area, tax accountant Vicki Thanos, shares her knowledge.
I am helping my mother put financial assets in her name, after the death of my father. Mum was the sole beneficiary in Dad’s will.
Dad had one shareholding in his name and others in joint names with Mum. If the shareholdings are left in Dad’s name, and the joint holdings are kept in joint names, what is the consequence?
I believe one consequence will be that a tax return will have to be lodged under Dad’s name, as income, in the form of dividends, will have been received in Dad’s name during the year. My understanding is that this applies to shareholdings in his name and for joint names.
A. Regarding the shares in joint names, there would be no CGT payable when the shares are transferred from joint names to your mother’s name.
Dividends paid from your father’s date of death will be fully assessable to your mother regardless of whether the shares have been transferred to her sole name or not.
Capital gains tax would be payable only when your mother ultimately sells these shares.
If the shares were originally purchased before 19 September 1985, then for tax purposes, your mother will be deemed to have acquired your father’s half of the shares at his date of death. The cost base for this half share would be their market value at your father’s date of death. The 50 per cent share would be subject to CGT on any growth from your father’s date of death to the date the shares are ultimately sold by your mother. Your mother’s 50 per cent share will be CGT-free when sold.
If the shares were originally purchased on or after 19 September 1985, then the cost base of the shares will be what they both originally paid for the shares; that is, the entire gain (from the date your dad purchased the shares to the date the shares were sold by your mother) would be subject to CGT.
Of course, all the above assumes that you are all Australian residents.
Vicki Thanos is a Tax Accountant (Estates and Trusts) at BNR Partners.
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Disclaimer: This information provided should be considered general in nature – legal advice should be sought.