LJ HOOKER Fremantle principal Tony Cavallo has warned investors and home owners that appointed executors of an estate can be unprepared and ill-equipped for their responsibilities.
LJ HOOKER Fremantle principal Tony Cavallo has warned investors and home owners that appointed executors of an estate can be unprepared and ill-equipped for their responsibilities.
He said that friends or relatives often appointed as executors of an estate have little, if any, training or knowledge of the capital gains consequences of their actions.
“Coming to grips with capital gains tax on property assets is difficult at any time, but is often even more complicated in relation to assets left upon the death of a person,” Mr Cavallo said.
Capital gains tax does not apply to any properties acquired before 19 September 1985.
“Three situations, in particular, often cause difficulty, and these emphasise the importance of obtaining professional and expert advice,” he said.
The first relates to a property purchased prior to 19 September 1985 for investment purposes.
“Because the investment asset was purchased prior to the introduction of capital gains tax, no capital gains tax applies to the deceased’s estate,” Mr Cavallo said.
“However, where the property is left to parties other than the spouse, and the beneficiaries decide at a later date to sell the property, any profit to those beneficiaries will be subject to capital gains tax.
“The capital gain will be determined on the proceeds of the new sale minus the value of the property at the time of the deceased’s passing with an inflationary figure factored in.”
The second situation occurs where one of the owners dies.
In this case, a full exemption will apply to the transfer of the home as long as the spouse beneficiary lived in the property with the deceased prior to his or her death, or lived in the property for the period from his or her death to the date that the executor transferred the property to the spouse.
A third problem exists where a property was purchased prior to 19 September 1985, and used for primary production. Changes in land use may be deemed to have triggered capital gains tax legislation even though the property has not yet been the subject of an estate.
This may arise due to a partial subdivision and could affect the capital gains tax, estate planning and Federal taxation strategy of the family involved.
“Estate planning may be compromised by an earlier, unknown change in capital gains tax status,” he said.
“Anyone appointed as an executor should seek expert advice on the effects of capital gains legislation on the estate for which they are responsible.”
He said that friends or relatives often appointed as executors of an estate have little, if any, training or knowledge of the capital gains consequences of their actions.
“Coming to grips with capital gains tax on property assets is difficult at any time, but is often even more complicated in relation to assets left upon the death of a person,” Mr Cavallo said.
Capital gains tax does not apply to any properties acquired before 19 September 1985.
“Three situations, in particular, often cause difficulty, and these emphasise the importance of obtaining professional and expert advice,” he said.
The first relates to a property purchased prior to 19 September 1985 for investment purposes.
“Because the investment asset was purchased prior to the introduction of capital gains tax, no capital gains tax applies to the deceased’s estate,” Mr Cavallo said.
“However, where the property is left to parties other than the spouse, and the beneficiaries decide at a later date to sell the property, any profit to those beneficiaries will be subject to capital gains tax.
“The capital gain will be determined on the proceeds of the new sale minus the value of the property at the time of the deceased’s passing with an inflationary figure factored in.”
The second situation occurs where one of the owners dies.
In this case, a full exemption will apply to the transfer of the home as long as the spouse beneficiary lived in the property with the deceased prior to his or her death, or lived in the property for the period from his or her death to the date that the executor transferred the property to the spouse.
A third problem exists where a property was purchased prior to 19 September 1985, and used for primary production. Changes in land use may be deemed to have triggered capital gains tax legislation even though the property has not yet been the subject of an estate.
This may arise due to a partial subdivision and could affect the capital gains tax, estate planning and Federal taxation strategy of the family involved.
“Estate planning may be compromised by an earlier, unknown change in capital gains tax status,” he said.
“Anyone appointed as an executor should seek expert advice on the effects of capital gains legislation on the estate for which they are responsible.”
