Advice on Settlement of Estate Accounts and Minimizing Tax Liability

6 May 2018
Mr. George Spencer (Sole Executor)
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Dear Mr. George,
From deep within my heart, I would like to express my sympathy and condolence on the demise of your
father Late Alexander P Spencer. I am short of words and it is difficult for me to convey to you how much
saddened I am on hearing about the death, may his respected soul rest in peace.
We would also like to thank you for employing our services with respect to advice on settlement of the
Estates accounts of your deceased father.
Before proceeding further, I would like to outline the scope of the discussion with which the letter
follows and that would be to help you minimize your tax liability and advising you on if you can sell the
shares in the estates now or transfer the shares to yourself and then sells them.
In accordance with the scope mentioned above, we intend to advise you to transfer the shares to
yourself and then sell the shares at a later date and avoid paying a higher tax bill.
If you sell a capital asset such as share in your case, you will make a capital gain or a capital loss, which
will be the difference between the cost of acquisition, and the money you receive when you dispose it. It
will be added to your assessable income and may significantly increase your tax liability if not properly
planned. (Government, Australian, 2017)
As per the Australian Tax office, if you are a beneficiary of a person who has died, then in case of shares
you are assumed to have acquired the asset on the date of death of the person that in our case is 15
November 2015, but the capital gain tax will not apply on acquisition of such assets. Capital gain tax will
apply only when the beneficiary sells the asset and; hence, the date of the person death is relevant for
calculating the capital gain tax. (Government, Australian, 2017)
The shares your father acquired prior to 20 September 1985 are exempt from Capital Gain Tax if you
transfer the same in your name. However, if you choose not to transfer these shares, the cost base for
determining a future Capital Gain will be the date of your father’s death.
For shares your father acquired after 20 September 1985, the cost base will be the purchase price paid
by your father. When you sell these shares, you will pay Capital Gain Tax on the capital gain.
(Government, Australian, 2017)