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Inherited Shares……. Keep or Sell?

It is not unusual for the assets in an estate to include shares in companies listed on the Australian Stock Exchange.  If those shares were purchased by the deceased after 23 September 1985 (being the date Capital Gains Tax (“CGT”) was introduced in Australia) and if they are sold, then CGT will be payable in respect of the profit generated by the sale.  However, if the beneficiary of the shares decides to keep the shares, then no CGT is payable by the beneficiary unless he or she subsequently sells the shares.

The beneficiary will receive the dividends whilst he or she continues to own the shares.  If the beneficiary still owns the shares when he or she dies, then they pass under the beneficiary’s Will to the next beneficiary.  No CGT is then payable unless the shares are sold.

The dilemma for (some) beneficiaries is to decide whether to sell the shares and incur the CGT or to keep the shares and therefore pass the CGT liability to the next owner.

It is wise for the executor of a deceased estate to establish the purchase price of the shares and inform the beneficiary as when the shares are ultimately sold (whenever that may be), the cost price must be known to establish the CGT payable.

Liability limited by a scheme approved under the Professional Standard Legislation

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