My wife has terminal cancer and is in the latter period of her life. We own about $300,000 worth of shares, mostly banks. When my wife passes, the shares we hold jointly will transfer to me. How are those shares treated? Will I have to pay income tax on them?
We are both pensioners in our 80s and were hoping to leave as much as we can to our two boys so that they can live a bit easier than we did. We own our home.
There will always be a capital gains tax assessment whenever you sell shares.Credit: Kerrie Leishman
Thanks for your question and sorry to hear about your wife’s condition. Generally, when an asset changes ownership, a capital gains tax assessment is triggered.
However, there is an exception where that change of ownership is caused by the death of the owner of the asset. In this instance, the capital gains position may continue unimpacted. In the circumstance you describe there is no tax payable at the point the ownership changes from joint to individual. However, there will remain capital gains tax assessable whenever the shares are eventually sold.
You mentioned that most of these shareholdings are in the banks. Potentially you could be holding CBA shares bought in the float at $5.40, in which case you may be sitting on a large gain. If that is the case you should sit down with a tax accountant and consider whether these shares should be sold now, when the capital gain can be spread across two individuals, rather than wait until the entire gain would be attributable to you solely, or more likely, your sons if they were to inherit the shares.
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Individually we can earn up to $18,200 before paying any tax. (Even more in your case as a pensioner). As a couple this tax-free amount is effectively doubled to $36,400, meaning you have a lot more room to absorb a capital gain.
Note however that if you sell the shares and trigger a capital gain, this will impact the income test for your age pension, potentially resulting in you losing your age pension for a period of time. It would therefore be important to evaluate the tax saved by liquidating the investment now, versus the age pension lost.
Finally, ensure your superannuation nominations are up to date, and that your estate planning documents are in order, particularly concerning a power of attorney for you, likely one or both of your sons.
