08 November 2019
Wills – Foreign beneficiary and CGT implications
I have a client who is an Australian citizen residing in Australia who wishes to prepare a will. Is it possible to have a beneficiary who is a non-resident currently living in a foreign country?
Thank you for the question.
Yes, but there may be tax consequences for the estate.
Other than taxable Australian property, all assets that pass to a non-resident through an estate will be subject to capital gains tax and any rollover relief that might ordinarily apply is not available.
The consequence for the estate is that the deceased is deemed to have disposed of the assets that pass to a foreign resident at the date of the deceased’s death. The value used to calculate the CGT payable is the market value of the assets as at the date of death. Any applicable CGT must be recorded in the deceased’s date of death tax return and any applicable tax must be paid by the estate accordingly. Unless the will contains a provision that allows for an adjustment in these circumstances, the tax will be deducted from the residuary estate.
Regards
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