Inheriting shares - What becomes your cost base?

John sadly passed away in 2025. He had owned two parcels of BHP shares – one purchased in 1980 and another in 2000. His daughter Anna, a nun, inherited both parcels. Investing was not her interest, so she decided to sell. Before doing so, she sought advice on the potential capital gains tax implications of the sale, particularly how to determine the cost base of the shares.

Capital Gains Tax (CGT) was introduced in Australia on 20 September 1985. Assets acquired before this date are generally exempt from CGT; however, if inherited, the cost base resets to the market value at the date of death. Assets acquired on or after this date are subject to CGT, and the beneficiary inherits the deceased’s original cost base.

Applying this rule to Anna’s case:

• Parcel 1 – Bought in 1980

John purchased these shares for $2 each. As pre-CGT assets, Anna’s cost base is the market value at John’s death in 2025, which was $40 per share.

• Parcel 2 – Bought in 2000

John purchased these shares for $10 each. As post-CGT assets, Anna inherits John’s original cost base of $10 per share, even though they were worth $40 at the time of his death.

Fast forward to the sale

If Anna later sells both parcels for $50 each:

• Parcel 1 (1980): Cost base $40 → taxable gain = $10 per share.

• Parcel 2 (2000): Cost base $10 → taxable gain = $40 per share.

✅ What this means for you

Two people can inherit shares with the same market value but face very different tax outcomes depending on when the shares were originally acquired. Understanding these rules and seeking expert advice before making decisions can make a significant difference to your tax liability.