Seeking opinions on calculating CGT on inherited shares

Hi there - newbie here gratefully seeking some guidance. I don’t expect any easy answers but I’m very keen for any guidance on the best type of financial professional to seek help from.

The situation is that my brother and I inherited a share portfolio from our late mother. My brother has already sold some of his shares (BHP and CBA), but is now struggling to work out CGT implications as we don’t know when the shares were acquired (pre or post 1985).

Does my brother pay CGT from the date that he acquired the shares (1/7/2010) or does he pay CGT from when our mother acquired the shares? If it’s the latter, how do we find out when our mother acquired the shares (we currently have no paperwork on this)? And how does this work if she was acquiring shares progressively (presumably at different prices)?

A second issue is that we know mum inherited some shares from her father around 1987. I don’t have any HIN/SRN details for him. Do I need to go back and determine when he bought those shares? It gets tricky because I understand that pre ’98, many share records are not electronic, and there is a considerable fee to investigate further. Has anyone had experience with this?

I have found HIN / SRN details for my mum, which could help. Unfortunately I don’t have any other information from the executor of the estate. Thanks in advance for any guidance you can offer.

Denver74 said:

... Thanks in advance for any guidance you can offer.

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We are all scared to have a go at this kind of thing.
Getting it wrong can be expensive!

Broker
Ok! You have found HIN / SRN details for your mum.
This means you have found her broker.
Contact that broker and ask for the details for your mum's account.
Then ask if your grandfather held an account with them as well.

Tax Office
Go to the Tax Office website and learn all you can about CGT.
If you phone or write, you will find them helpful.

Share Registry
CBA has its shares monitored by a share registry company.
LINK MARKET SERVICES LTD
LEVEL 12, 680 GEORGE STREET, SYDNEY, NSW, AUSTRALIA, 2000

BHP also has its shares monitored by a share registry company.
COMPUTERSHARE INVESTOR SERVICES PTY LIMITED
YARRA FALLS, 452 JOHNSTON STREET, ABBOTSFORD, VIC, AUSTRALIA, 3067

Find the registry for each company held and inquire with each one.
You can ring or write them.

That should get the ball rolling!

Many thanks Burglar!! I had planned on contacting the share registries today actually so was pleased to see I'm on the right path. We're not sure if mum had a broker (I really wish I'd paid more attention!) - I got her HIN/SRN details from some paper records. I'll see if my dad knows any more on that as well.
Not only am I trying to help my brother, if there are significant tax implications it may be in my best interests to sell now as I'm currently on maternity leave and will only have income from an investment property and share dividends this financial year.
My only other question is whether I should be contacting any specific type of accountant or financial professional to help investigate this? Or is it something I can do myself? I'm not particularly financially savvy but can learn quickly (I hope!)

burglar said:

We are all scared to have a go at this kind of thing.
Getting it wrong can be expensive!

Share Registry
Find the registry for each company held and inquire with each one.
You can ring or write them.

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... or you can visit their website and register. In most cases, all you need to know to register is the HIN and the post code of your late mother's residence. It will be even easier if you know the name or code of at least one company in the portfolio. Below are the websites of Australian registries that I know of and regularly deal with. I believe the list is exhaustive.

Advanced: http://www.advancedshare.com.au/Home.aspx
Boardroom: http://www.boardroomlimited.com.au/
Computershare: https://www-au.computershare.com/investor/
Link Market Service: https://www.linkmarketservices.com.au/corporate/home.html
Security Transfer: https://www.securitytransfer.com.au/index.cfm

Thanks Pixel as well! I've been using the websites and they've been a great help in getting transactional details but the records online don't articulate purchase date. However, several phone calls later and I'm finally starting to get somewhere with at least a few of the companies. Off to the ATO website now to read up on CGT - thanks again for your help!

burglar said:

Broker
Ok! You have found HIN / SRN details for your mum.
This means you have found her broker.

Click to expand...

I might have got this bit a little bit wrong.
I thought the HIN would divulge the brokers identity.
Glad to see you have made headway.


HIN/SRN linkmarketservices

HIN/SRN

A HIN or SRN can have up to 12 characters, usually starting with an 'X', 'I' or 'C' followed by up to 11 digit number, for example 'X00012345678' or 'X12345678'.

The HIN or SRN can be found on the top right hand corner of your holding statement and other shareholder communications.

A HIN, being Broker sponsored, commences with an 'X'. If you have an account number from a CHESS statement you will need to add an 'X' to the front of the account number before logging in.

A SRN, being Issuer sponsored, commences with an 'I' or 'C'. You will need to enter the 'I' or 'C' followed by the 11 digit number before logging in.

Important note - your HIN/SRN identifies you as the owner of your securities and should be stored securely.

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Denver74 said:

... will only have income from an investment property and share dividends this financial year ...

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If you intend to be financially savvy in the long term,
I would suggest you do as much as possible for yourself!

You seem to be bright and a fast learner, if that is a helpful observation.

If it is doing your head in, do use tax accountant or financial planner.
But, ... I would suggest some in that industry talk very slowly and then repeat what they have said.




Two professionals I have met, gave a quarter hour's worth of info,
spread it over an hour and then charged for a full hour.

Denver74 said:

Does my brother pay CGT from the date that he acquired the shares (1/7/2010) or does he pay CGT from when our mother acquired the shares? If it’s the latter, how do we find out when our mother acquired the shares (we currently have no paperwork on this)? And how does this work if she was acquiring shares progressively (presumably at different prices)?

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The cost base will be the value of the shares on the day you're mother passed away. You then have 12 months (I think) to dispose of them without paying CGT on the adjusted cost base.

IANAL/Accountant so don't take my word and check with one or both.

McLovin - one can only hope you're right - will be speaking to our accountant next week and will put forward the suggestion - thanks!

Burglar - thanks for the kind words - I'll see how things go before going down the path of seeking professional advice. Am hoping to speak to the ATO today for more clarification - thanks again for your help!

Denver74 said:

... Am hoping to speak to the ATO today for more clarification - thanks again for your help!

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It is good that you speak with the ATO.
Find out what their minimum requirements.
That may save you exhaustive research! Or at least justify your effort.

CGT
It's not rocket science, but it does have nuances.
Use this low income period you're in, to minimise your CGT

Denver74 said:

Hi there - newbie here gratefully seeking some guidance. I don’t expect any easy answers but I’m very keen for any guidance on the best type of financial professional to seek help from.

The situation is that my brother and I inherited a share portfolio from our late mother. My brother has already sold some of his shares (BHP and CBA), but is now struggling to work out CGT implications as we don’t know when the shares were acquired (pre or post 1985).

Does my brother pay CGT from the date that he acquired the shares (1/7/2010) or does he pay CGT from when our mother acquired the shares? If it’s the latter, how do we find out when our mother acquired the shares (we currently have no paperwork on this)? And how does this work if she was acquiring shares progressively (presumably at different prices)?

A second issue is that we know mum inherited some shares from her father around 1987. I don’t have any HIN/SRN details for him. Do I need to go back and determine when he bought those shares? It gets tricky because I understand that pre ’98, many share records are not electronic, and there is a considerable fee to investigate further. Has anyone had experience with this?

I have found HIN / SRN details for my mum, which could help. Unfortunately I don’t have any other information from the executor of the estate. Thanks in advance for any guidance you can offer.

Click to expand...

Capital gains arent tricky on their own but they can be when it comes to estate planning/ death benefits etc. Here is some information which may assist you on the topic from one of my text books from when I was studying (I didnt specifically study this area but it just formed part of the overall material). It's just straight copy and paste. I have not adapted it your your specific case and im not sure how much you already know, hopefully it is of some help.


Capital gains tax and death

Special capital gains rules apply to those persons to whom assets are transferred
after death. When the deceased’s assets pass to a legal personal representative
(LPR) or beneficiary, a CGT event does in fact occur; however special rules apply
so that the event is ignored for tax purposes. Special acquisition rules are applied
depending on when the deceased originally acquired the asset to determine the
cost base that will apply to the beneficiary.

Assets acquired by the deceased before 20 September 1985
For pre-CGT assets, either the legal personal representative or a beneficiary is
deemed to have acquired the asset on the date of death of the deceased.
The cost base assigned to the asset will be its market value on that day.

Assets acquired by the deceased on or after 20 September 1985
If a CGT event is triggered by the LPR, executor or a beneficiary of a deceased's
estate, the CGT liability is calculated under normal capital gains rules using the
deceased's original cost base or reduced cost base.

Note: A capital loss of the deceased taxpayer may be offset against gains in the
final individual return but any unrecouped losses are lost altogether.
Inherited assets are taken to be acquired at the time of death.
A beneficiary can include in the cost base, or reduced cost base, any expenditure
incurred by the legal personal representative that would have been included at
the time the asset passed to the beneficiary. The expenditure can be included in
the cost base on the day it was incurred.

Deemed disposal by a beneficiary
Once a beneficiary receives an asset from a deceased estate they may be liable
for any capital gain or loss if it is:
• sold
• gifted/donated, or
• destroyed.

Disposal by a legal personal representative

The deceased's legal personal representative is liable for any capital gain or loss
if a post-CGT asset (which means that it is acquired on or after 20 September
1985) the deceased owned just before they died:

• passes to a tax advantaged entity, such as:
– a tax exempt entity, e.g. a charity or a church
– a non-resident, or
– the trustee of a complying superannuation fund, in their capacity as trustee

• is transferred from the deceased's legal personal representative to an entity that
is not a beneficiary:
– during the administration or winding-up of a deceased estate, a legal personal
representative may need to dispose of some or all of the assets of the estate
to provide a cash legacy or to pay debts.

If the passing of a deceased's asset does constitute a CGT event, the event is
deemed to have taken place on the date of death of the deceased. Any capital
gain or loss is taken into account in the date of death return and as such must be
paid by the legal personal representative of the estate.

Hodgie said:

... Capital gains tax and death ...

Click to expand...

Hi Hodgie,

That's a lot of nuances!
Thanks.
I'm glad you brought it up!

I learnt a little bit today!

Hi Hodgie - wow - thanks for this - I think my head is hurting a little but a key take out for me is this:
If a CGT event is triggered by the LPR, executor or a beneficiary of a deceased's
estate, the CGT liability is calculated under normal capital gains rules using the
deceased's original cost base or reduced cost base.
The final challenge is to try to determine if any shares were in fact inherited by my mother (and if this was the case, they would have been originally purchased pre-85 by my grandfather) ...
Thanks again for your help!

Denver74 said:

... as I'm currently on maternity leave ...

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A little ray of sunshine!