When making a Will you need to be aware of special rules that apply to gifts to non-resident beneficiaries. These rules can even apply to gifts to Australian citizens who have lived overseas for a long period.
The general rule is that the beneficiary is taken to have acquired the assets on the day the testator died, and any capital gain or loss relating to a Capital Gain Tax (CGT) asset owned by the deceased is disregarded. That means-
• no CGT is payable from the estate
• no CGT is potentially payable by the beneficiary until he or she actually sells it; and
• the beneficiary will usually have access to a range of CGT concessions when he or she actually sells.
If however the beneficiary is a non-resident for tax purposes the outcomes can be very different. Potentially CGT can be payable as an estate expense which-
• brings forward the CGT cost; and
• corrupts the intended balance between beneficiaries as because it is payable as an expense of the estate, the cost will be borne by all beneficiaries, not just the non-resident.
Also, when the asset is ultimately sold by the non-resident, he or she may also not have access to the usual CGT concessions.
The potential tax costs to the estate are avoided if the relevant asset comes within the definition of “taxable Australian property” contained in the tax law. Broadly this refers to direct and indirect interests in Australian real property but even then the beneficiary may not get access to the usual CGT concessions when he or she sells.
From an estate planning viewpoint, the key points are –
• recognise the issue at the planning stage. Generally it will be too late to deal with the issue after death;
• where possible, avoid the issue arising by being selective in the type of gifts made to non residents e.g. cash rather than property; but
• If a tax cost is unavoidable, make sure it is borne by the appropriate party.
Many Wills involve complex and unexpected issues. At Everingham Solomons we have experts that can assist you to plan what happens to your estate or review what you have in place because helping you is our business.

When making a Will you need to be aware of special rules that apply to gifts to non-resident beneficiaries. These rules can even apply to gifts to Australian citizens who have lived overseas for a long period.
The general rule is that the beneficiary is taken to have acquired the assets on the day the testator died, and any capital gain or loss relating to a Capital Gain Tax (CGT) asset owned by the deceased is disregarded. That means-
• no CGT is payable from the estate
• no CGT is potentially payable by the beneficiary until he or she actually sells it; and
• the beneficiary will usually have access to a range of CGT concessions when he or she actually sells.
If however the beneficiary is a non-resident for tax purposes the outcomes can be very different. Potentially CGT can be payable as an estate expense which-
• brings forward the CGT cost; and
• corrupts the intended balance between beneficiaries as because it is payable as an expense of the estate, the cost will be borne by all beneficiaries, not just the non-resident.
Also, when the asset is ultimately sold by the non-resident, he or she may also not have access to the usual CGT concessions.
The potential tax costs to the estate are avoided if the relevant asset comes within the definition of “taxable Australian property” contained in the tax law. Broadly this refers to direct and indirect interests in Australian real property but even then the beneficiary may not get access to the usual CGT concessions when he or she sells.
From an estate planning viewpoint, the key points are –
• recognise the issue at the planning stage. Generally it will be too late to deal with the issue after death;
• where possible, avoid the issue arising by being selective in the type of gifts made to non residents e.g. cash rather than property; but
• If a tax cost is unavoidable, make sure it is borne by the appropriate party.
Many Wills involve complex and unexpected issues. At Everingham Solomons we have experts that can assist you to plan what happens to your estate or review what you have in place because Helping You is Our Business.

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