Question
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Curious. Interesting. Informative.

28 November 2015

It’s all in the timing

Wills, Powers, Estates & Family Provision Claims
Federal

Asked

Fifty years ago a couple purchased a house as tenants in common 50%/50%.

Twenty years ago the wife died leaving the husband a life interest in the house, for her half share, residue to the children. This year the husband and executor sold the house.

The husband is now very old and wants to relinquish his life interest so that the children can receive the sale proceeds. The value of the property, since her death 20 years ago, has increased significantly.

Are there any CGT implications for the estate or the children?

Answered

See ATO tax ruling 2006/14 from which an analysis of the tax outcomes can be made.

Without knowing the full facts Mentor can only point out the following issues for consideration:

  • The increase in value of the children's remainder interest, now sold, may be subject to CGT with a cost base as at the date of its creation in 1994.
  • The renunciation if effective as at 1994 could result in a greater CGT liability for the children in the whole freehold estate.
  • The father can gift the proceeds of sale to the children without tax consequences but this will only reduce his assets for pension purposes by a small amount if that is relevant.

Regards

Mentor