An often overlooked issue when preparing a will is the applicability of any taxes when the estate is distributed.
While there is no “inheritance tax” (aka death duties or death tax) in Queensland, other taxes such as capital gains tax and stamp duty can affect your estate, your inheritance or your beneficiaries if the most appropriate estate planning strategies are not employed by your lawyer or yourself when preparing your will.
Capital Gains Tax (CGT) in Australia essentially revolves around the concept of a ‘CGT event’. A CGT event arises when an asset is transferred. When it comes to a will, a CGT event can arise in essentially two instances:
- If your will directs that a particular property is to be sold upon your death, then a CGT event will arise and your estate will be liable for any applicable capital gains tax. The only potential exemption to triggering the CGT event is if you resided in the property as your main residence from the date of purchase until your death;
- If your will directs that a particular property is to be transferred to a nominated beneficiary, then a CGT event will arise when your beneficiary subsequently transfers the property. Please note, however, that the acquisition price for the CGT event is calculated from when you acquired the property, not when your beneficiary receives it.
In relation to stamp duty, a general exemption applies on properties being transferred to beneficiaries pursuant to the terms of a will. However, any subsequent transfers will attract stamp duty. For example, consider a situation where your will directs the sale of your family home for the specific benefit of one of your children. Another of your children may wish to purchase the property (it is, after all, the family home). Stamp duty will be payable on the sale of the property from your estate to that child.
Whilst inheritance tax is not payable in Queensland, you should make sure that your will effectively provides for your intended estate planning objectives.
Should you want some advice as to whether your will conveys your estate planning intentions, or should you have any concerns about the applicability of capital gains tax or stamp duty on your estate, please do not hesitate to contact our will & estate lawyers.
Content by Anthony Kyle