Tax Q&A: Stamp duty on inherited properties

07/05/2018

 

Q: My parents own several properties in Victoria and the ACT, which my siblings and I will inherit jointly. We will not live in any of the properties, so effectively they will become our investments. Will we have to pay stamp duty for the titles of the properties to be changed to our names, or are there exemptions available for inherited properties? My parents also own a share portfolio. If we sold the shares, how would we work out how much CGT would be payable?
Thanks, Jack

Have you got tax queries regarding your property investments and wealth creation strategies? Our experts are on hand to answer them.
If you would like your tax question answered in our magazine or on our website, please email your question to: editor.yipmag@keymedia.com.au

 

A: There is an exemption from stamp duty in Victoria for the transfer of property from a legal personal representative (eg executor) to a beneficiary.

However, the exemption is only available if the transfer is: (i) not made for valuable consideration, and (ii) made under, or in conformity with, the trusts contained in the will of the deceased or arising on intestacy, or if the transfer is of property subject to a trust for sale under the will.

Under the first requirement, there must be no consideration paid for the transfer of the property.

Thus, for example, you and your siblings cannot buy the property from the executor.

To satisfy the second requirement, the transfer must be made strictly in accordance with the will.

For example, if your mum gifts the property to you and your siblings equally in her will, the property must be transferred to each of you on that basis (ie if there are two siblings to receive the properties, then they must be split 50% between each sibling).

Alternatively, if the will simply states that you are each 50% residuary benefi ciaries, a full exemption will be available if the value of the assets transferred to each of you does not exceed the value of your 50% interest in the residuary estate. In the latter case, you may need to execute a Deed of Family Arrangement.


"The exemption from stamp duty is only available if the transfer of property is made strictly in accordance with the will"

See Victorian Revenue Ruling DA051 for a more detailed explanation of the operation of the exemption.

In the ACT, while there is no exemption from stamp duty, concessional duty of $20 will be charged on the transfer of property by a legal personal representative to a beneficiary of a deceased estate. The basic requirements to access the concessional rate are the same as in Victoria.

Regarding shares, assuming the shares are jointly owned, they will be treated in a similar manner to an investment property. The first element of the cost base of the shares will be their cost base on the date of your parent’s death (ie the price they paid for the shares, plus certain other costs).

You will thus inherit the cost base from your parents. 

You or the executor will need to contact your parents’ tax adviser after their death to obtain details of the cost base.

You may be able to take advantage of the 50% CGT discount as well. If the shares are sold at least 12 months after the death of the first parent, then you should be able to apply the 50% discount or indexation to the cost base of the shares, although you cannot do both. Indexation is only available if the shares were purchased before 21 September 1999.

Need to know
- In Victoria, there is an exemption from stamp duty when property is transferred from a legal personal representative to a beneficiary.
- In the ACT, while there is no exemption from stamp duty, concessional duty of $20 will be charged.
- If shares are sold at least 12 months after the death of the first parent, the 50% CGT discount may be applicable. 


Jessica Pengelly
Senior associate at
Finlaysons Lawyers

 

 

 

Top Suburbs : menai , melton , mt colah , woolloongabba , tweed heads south

SHARE

Get help with your investment property



Do you need help finding the right loan for your investment?


When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.

Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus an appointment is free.

How soon would you like a mortgage?
What is your Annual Household Income i $
Do you currently own any Investment Properties?
Do you own your own residence?
How much equity do you have in all your current properties?
First Name
Last Name
Where do you live?
What number can we reach you on?
E-mail address
We value your privacy and treat all your information seriously - you can check out our privacy policy here