Question about AFI bonus share program

Discussion in 'Shares & Funds' started by maverick, 18th Jun, 2021.

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  1. maverick

    maverick Well-Known Member

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    Reading the ATO rules on their website has gotten me even more confused. So the plan is to hold AFI shares (in my own name) and elect to receive bonus shares until I retire at which point I will switch back to cash dividends for a passive income. As discussed on these forums, one major issue with this strategy is that the overall cost base of the shares is greatly reduced meaning a high CGT liability when the shares are eventually sold.

    With that in mind, what happens if I never sell and still own them when I die? Will my kids have to pay the CGT upfront when they inherit the shares, or will it be deferred until they sell?
    And when they do pay CGT, what cost base will the ATO use to calculate the tax amount? (will it be my overall acquisition price, or will it be the ASX market price at the time they inherit the shares?)

    Any thoughts/personal experience would be much appreciated.
     
  2. SatayKing

    SatayKing Well-Known Member

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    Best to start here and then seek professional advice I think. Covers Bonus shares and Deceased Estates.

    CGT assets and exemptions
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Death doesn't trigger any CGT event and neither does a transfer from you to the executor to the trustee and then to the beneficiary. Only when the shares are sold or disposed of will there be a CGT. The cost base will be the cost base of the deceased person.

    but, if a beneficiary is a non-resident it will trigger CGT on inheritance so make sure you cover this in your will

    Tax Tip 299: CGT Trap if Leaving Shares on Death to a Non-Resident Beneficiary Tax Tip 299: CGT Trap if Leaving Shares on Death to a Non-Resident Beneficiary

    Tax Tip 300: Strategy to Avoid Triggering CGT on Death with Non-Resident Children Tax Tip 300: Strategy to Avoid Triggering CGT on Death with Non-Resident Children
     
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  4. maverick

    maverick Well-Known Member

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    Cheers Terry, that was a lot of help! Thinking about this further, would it be wiser to just buy/hold the shares in a discretionary trust? And have my will set up so that when I die, the control of the trust will pass on to my children. It would also allow me to distribute dividends to them even before I die.
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    A discretionary trust might provide more flexibility now, but a testamentary discretionary trust set up in the will can provide the same flexibility, after death, but greater tax benefits later.
    Something you should seek specific legal advice on
     
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  6. maverick

    maverick Well-Known Member

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    I'll definitely get advice for both. Thanks again.
     
    Terry_w likes this.

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