I am a 75-year-old lady living in an independent living aged care village – so no equity to gain – and I’m feeling concerned for my future. Life’s okay on the full aged pension, but I don’t want to run out of money. In this shaky world, I’m nervous that if I lose value in shares, will I have the time for them to recover and grow? Probably not! I have some $45,000 in cash, $65,000 in shares and $45,000 put aside but also in shares, for the grandchildren, mostly ETFs. What can I do to grow my wealth?
If you want to achieve growth on your investments over and above term deposit rates, you need to invest in the share market.
The share market, which has been strong so far in 2023, may drift down if high-interest rates drive the US economy into recession and weaken ours. However, our resources sector is strong, and I suspect we’ll escape a recession. Why not see how things progress after mid-year, and then invest cash into income-producing shares and ETFs.
If you want to achieve growth on your investments over and above term deposit rates, you need to invest in the share market.Credit:Peter Braig
My mother died in 2017 and her house was valued at $1.42 million. The estate was finally wound up in 2021 and the house was valued then at $1.2 million when I inherited half of it with my sister. We sold it in late 2022 for $1.6 million and got half each, $800,000 less agents’ fees. I’m a self-funded retiree who rents with my wife so had no home at the time of the sale. I also receive about $2,000 a year from investments. My sister lived in the house all her life and I received no income from it in any way. Could you please advise if I need to pay capital gains and, if so, how much?
I assume the house was in your mother’s name, was bought after September 1985, and she lived in it without renting any part of it. That would mean the house was exempt from CGT when she died.
Then your sister, a beneficiary of the will (which I presume did not allow her a “life estate”), continued to use the house as her main residence, so it continued to be fully CGT-exempt until ownership passed to the two of you in 2021.
Your sister’s half remains CGT exempt until she moved out in 2022. Now death is usually considered a CGT event but not the transfer of ownership of the property from the deceased estate to the two of you. So, your cost base would be half of the value of the house at the date of death, or $710,000.
Thus, your capital gain would be $90,000, reduced by selling fees. Having owned the property for over 12 months, then the 50 per cent discount means that $45,000, or less, would be added to your taxable income in 2022-23.
If you are taxed on $47,000, the tax would come to around $7,000.
I was fortunate enough to buy shares in the Commonwealth Bank when it floated back in 1991 for $5.40. I bought 500, but through the dividend reinvestment plan I now have 747 shares, worth around $100 each – or $75,000. I now wish to sell them but am daunted by the CGT calculations as there seem to be 62 separate CGT events for the dividends and I have no records beyond the last 10 years. Is there an easy way to calculate the tax liability via an app?
Theoretically, the bank’s share registrar, Link Market Services, would have a record of all your reinvestments, but registrars often charge for historical information. Some accountants’ software carries a database of all recent dividends paid, but they may not go back 32 years and, again, you would pay.
If you Google “CBA dividend history”, you should find a free list of all dividends paid by the bank, starting with the first half-yearly 20c dividend for 1991-92, paid in April 2022. If you had originally bought 500 shares, you would have received $100 in dividends.
The table also shows the then DRP price of $6.64 so that your $100 would have bought ($100/$6.64=) 15 more shares, with 6c carried over to the next dividend payment in October. Those 15 new shares will have a cost base of $6.64 when you sell them.
In October 1992, your 515 shares would have again received 20c each, or $103, reinvested at $5.62, resulting in 18 new shares with 33c carried forward, and so on. It’s an easy calculation.
On the next rainy weekend, sit down with a spreadsheet, or paper and calculator, and work your way up to your current 747 shares. I don’t think you have to be exact. While the ATO stipulates that people should keep records of all share transactions, the reality is that many don’t, so you need to submit a convincing cost base that results in a reasonable tax liability.
You may be able to reduce your capital gains tax by selling some shares before June 30th and some after July 1st. Given the latest dividend for the December 2022 half was $2.10, you made a good investment 32 years ago.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. All letters answered.
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