According to the most recent Intergenerational Report released by the Federal Government in August 2023, the next 15 to 20 years will see the greatest transfer of intergenerational wealth ever, with the number of Australians aged over 65 doubling from now until 2055 (and those over 85 will more than triple). Some estimates state the wealth transferred could be in excess of $5 Trillion!
Your clients will need assistance to effectively transfer the control and wealth of their Family Group to the next generation. To do so tax effectively requires pre planning and as their accountant, and their trusted advisor, you are best placed to facilitate that process.
The process of transferring wealth to the next generation can be termed many things, but for the purpose of putting a label on it and perhaps some consistency of message going forward, we will call it preparing an Estate Plan.
For a number of years we have been pushing our own HWI clients and private groups to start the conversation on considering their Estate Plan and what they would like to see happen to their assets, their entities including businesses and their super before and after they die.
Believe me, it is not an easy discussion and can take some time to gain traction. But I believe it is a discussion we need to have at some point, even if it is in bite size pieces.
Where the client’s wealth is held within trusts or companies, the control and operation of those entities after they pass is the key Estate Planning consideration. The assets themselves are not disposed of just because the trustee, director or shareholder dies.
Assets held in their Superannuation Fund will require their own Estate Plan to ensure that when the member’s benefit is paid out, the tax effectiveness the Fund has enjoyed is not undone by taxes on exit.
Personally held assets also have their own considerations when they pass to or through the Estate to ensure the right amount of capital gains tax (CGT) is eventually paid when a beneficiary sells that asset.
CGT Implications for the Trustee and Beneficiaries of Deceased Estate
From the perspective of the trustee and beneficiaries of the estate, where assets pass to the trustee on death, any capital gain or loss that arises in the hands of the trustee when those assets subsequently pass to one or more beneficiaries is disregarded[1].
Upon the transfer of the deceased’s assets to either the trustee of the deceased estate or one or more beneficiaries, the acquisition date and cost base of the assets are taken to be[2]:
| Assets | Acquisition Date | Cost Base |
| Pre-CGT | Date of death | Market Value as at date of death |
| Post-CGT | Date of death | Cost base or reduced cost base of the deceased |
| Main Residence[3] | Date of death | Market Value as at date of death |
For the purpose of applying the 50% general discount on a capital gain, for post CGT assets only, the trustee or beneficiary is taken to have acquired an asset when the deceased acquired the asset[4].
This means that the discount is available even when the trustee or beneficiary disposes of the asset within 12 months of acquiring it, as long as the deceased acquired it at least 12 months before the trustee or beneficiary disposes of the asset.
There are many tax issues that can arise when asset pass through an estate and these will need to be considered as part of an overall Estate Plan. Whilst the Will may deal with what happens to those personal assets, an Estate Plan should consider the tax implications of these bequests, the ongoing control of trusts and companies, ensuring necessary directions are in place for the Superannuation Fund and any other specific business, investment, health and family directions the client desires.
Estate Planning is more than just preparing the Will and requires input from the client’s accountant, financial advisor and other professionals to ensure the Estate lawyer can properly document the Plan to ensure the best outcome for the client.
If you would like to discuss the steps in developing or revising a client’s Estate Plan, please call Sean Pearce or Chris Schoeman.