non-resident beneficiaries of Australian estates

3 capital gains tax implications for non-resident beneficiaries of Australian estates

Tuesday, March 19, 2019 by

Have you recently become the beneficiary of an Australian estate? Do you know what capital gains tax implications this can have on your Australian tax return if you’re a non-resident?

If your answer is no, then here are 3 simple issues you need to consider.

You may need to pay capital gains tax immediately

Typically, if you’re an Australian resident, it’s considered that you acquired the asset on the date of the person’s death, and although capital gains tax isn’t payable immediately, it will apply later when you dispose of the asset.

However, the rules are different if you’re a non-resident beneficiary. All assets that are inherited through an Australian estate will be subject to capital gains tax if they are not taxable property.

How do I calculate the capital gains tax payable?

The amount of capital gains tax to be paid is calculated using the market value of the asset at the date of the person’s death. The capital gains tax value must be recorded in the deceased person’s “date of death” Australian tax return, and the tax is paid by the estate.

Unless the deceased person made provisions in their will to the contrary, the tax payable will be deducted from the available estate, and therefore the beneficiaries bear the cost.

Can the amount of capital gains tax payable be minimised?

The simple answer is yes. Depending on how the assets are to be divided within an estate, the executor of the will can choose to bequeath non-capital gains tax assets, such as cash, to non-resident beneficiaries. Beneficiaries who are Australian residents can be bequeathed any assets which will be subject to capital gains tax for example.

Should I seek professional advice?

Absolutely. It’s important that all implications are considered carefully, but who can you rely on to guide you through the tax minefield?

It’s simple, you contact us at Expat Tax Services.

We’re Australian Chartered Accountants who are expats ourselves and as such, we understand non-resident tax issues faved by you firsthand. So wherever you are in the world, whatever you do . . . we’ve got your Australian tax returns covered.

Shane Macfarlane
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Comments 2

  1. Hello
    Needing advice regarding my mums estate. We are Australian. My sister lives in Aus near my mum. I live in the uk.
    My mum has her house, investment property and shares.
    How do we organise it to reduce gst at her death? Thanks

    1. Hi Steven,

      Thanks for your questions. I will keep my answers brief as I can see we have a call scheduled for next week.

      Firstly you should review the Will to ensure that it provides the executor with adequate flexibility to determine how to distribute the assets so that the tax for the estate can be minimised.

      Generally when a person dies, a capital gain or loss that arises in relation to a CGT asset that they owned when they die is disregarded.

      However this rule is different when the beneficiary of the estate is a non-resident.

      For assets that pass to a beneficiary of an estate, assets that are taxable Australian property, such as Australian real property any capital gain/loss will be able to be disregarded until they are sold. However non-taxable Australian property, such as listed shares can not be disregarded and the gain/loss will be included in the tax return in the year of death.

      Assuming your mum’s house has always been her main residence it would have no capital gains tax and the cost base for the beneficiary will be the market value on the date of her death.

      For the investment property the cost base of the property for the beneficiary will be the same as your mum’s cost base.

      Regards,

      Terryn

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