I know that UK son has written his will. He mentioned that he has left assets to his brother in Aus. He is only currently an AU citizen. Do you hold dual? Given that we have only written an Aus will and are leaving son in UK half our estate and have not written a UK will then maybe same applies.
Not sure why you'd do a joint will or if that's even possible. We haven't because we have stipulated some different beneficiaries. Son hasn't in the UK either.
As far as your inheritance from any Au relatives, this is what our lawyer sought advice from someone within the practice who knows. This must not be taken as legal advice for you.
. A is son overseas and B is son living in Aus.
Generally, inheritance of assets following a death does not trigger a liability for Capital Gains Tax (CGT) in respect of any capital gains on the asset. CGT will apply only when an executor or beneficiary disposes of an asset. Your estate will not be liable for CGT, and at the time of inheritance, neither will A or B, unless there is a disposal, such as a sale.
In some instances, a foreign resident will incur CGT on inherited assets. However:
- cash is not a CGT asset, and therefore a distribution of cash to A will not be impacted by any CGT event; and
- the passing of real property from your estate to A will not give rise to any CGT consequences at the time of his inheritance.
However, the sale or disposal of real estate will always give rise to CGT in Australia. This also applies to any real estate inherited via a Will (unless that property is your main residence
and is sold with settlement occurring within two years of the date of death (with some time extensions possible), in which case it will be CGT exempt).
If, as a result of your Will, B inherits your main residence and it then becomes his main residence and he then sells or disposes of it, he would be entitled to the main residence CGT exemption. A as a foreign resident would not be entitled to the main residence exemption.
As per your current instructions, both A and B are to receive your real estate equally on the death of the last of you. Depending on when they sell the inherited property, they are likely to incur CGT. There are some distinctions in how that CGT event would be treated between A and B.
Foreign Resident Capital Gains Withholding
A may one day wish to sell any property he may inherit. As a foreign resident, when he does so, a 12.5% withholding tax will be payable at the time of settlement. This means that 12.5% of the purchase price, should the property be sold for more than $750,000, must be withheld by the purchaser and paid to the ATO. This tax applies to any Australian property, regardless if A is the sole owner or has only a part interest. In addition, A would have to put in a tax return and pay the remainder of the CGT calculated at the applicable tax rate. As a foreign resident, A would not be able to claim a 50% discount available to Australian residents.
The 12.5% withholding tax would not apply to a sale by B as an Australian resident, but he would nevertheless be liable for CGT, which would have to be disclosed in his tax return.
Main Residence Exemption
You have instructed that the XX property is your main residence for tax purposes. You have also instructed that the property, as part of the residue of your estate, will be left to B and Ben A on the death of the last of you.
(Discussion of property sale and CGT for an Aus resident so irrelevant to you)
A as a foreign resident, is not entitled to the Main Residence Exemption for sale of our home.
In any case, as noted above, A and B can avoid a CGT event on the sale of inherited property that was your main residence if settlement occurs within two years (or permitted extension period) of the date of death.
The take out of all of this is that cash is king for families who have family and friends overseas. I think
@VPS may have some experience in this for UK inheritance issues.
