For many years both the individual states and the Commonwealth imposed death duties, known as estate duty for the Commonwealth version. Premier Jo abolished death duty in Queensland, and the resultant rush of investment into Queensland led to his lead being followed throughout Australia, so there are no death duties as such in our country.
That doesn’t mean that governments following a death – that would probably be too much to hope for, at all, will collect no revenue!
There are three areas in which the State or Federal governments can gain from a deceased estate, and these are Superannuation, Capital Gains Tax and Stamp Duty.
If, following the death of a member, a superannuation fund has moneys to distribute by way of death benefits, or from a balance in the deceased member’s account. There will be tax payable on any payment other than to a dependant of the deceased, currently at the rate of 15%.
Dependants will normally only be a partner, children under eighteen, or adults with a disability, so adult children financially independent will lose 15% of any payment due to them!
A consequence of this is that retirees, particularly those in declining health, might need to consider taking money out of superannuation into their own names, but as this might affect pensions or income tax, advice should be sought before taking any action.
Capital Gains Tax (CGT) is imposed on any gain on property acquired after 1984, when it is disposed of, other than limited exemptions such as one’s home. However, transferring property to a beneficiary or to an executor is not treated as a disposal. A beneficiary inherits property at the original cost to the deceased, known as the base cost, and will become liable for CGT on any gain when he or she disposes of that property. The base cost includes expenses such as stamp duty and legal and borrowing costs, and the gain is also calculated taking the disposal costs into account.
The taxable gain, or in some cases half of the taxable gain, is then treated as income for the year in question, and added to any other income the seller may have earned.
This can, of course, lead to problems in Will-drafting and ensuring fair treatment of beneficiaries when different properties with varying potential capital gains are being left to different beneficiaries. If an executor sells assets so that cash can be distributed, a liability will exist in respect of capital gains on non-exempt asset sales. The CGT bill will be the estate, whereas if a property is specifically left to a beneficiary, the CGT bill on any eventual sale will be the beneficiary’s. This brings to mind one plea on behalf of investors and executors; please keep records of the date and cost of acquisition!
Where a dutiable asset such as real estate is being transferred to a beneficiary pursuant to a Will, or as part of a beneficiary’s share of an estate, a fixed maximum stamp duty of $50 applies. However, if a beneficiary’s share is less than the property’s value and the beneficiary has to pay the estate the difference, that difference is liable for stamp duty at normal rates.
So, there may not be any death duties as such, but many estates or beneficiaries will find themselves contributing to government coffers – surprise, surprise!
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