Non-resident Estate Beneficiaries

Non Resident Estate BeneficiariesGREY

Non-resident Estate Beneficiaries


One issue that can arise in estate planning is tax consequences due to non-resident beneficiaries.  At the time of death, if any bequest recipients are not tax residents of Australia there may be tax consequences which can effectively reduce the inheritance for all beneficiaries.


Tax consequences may apply with regards to Capital Gains Tax (CGT) for certain assets, such as Australian shares and units in managed investment trusts.


In the event of your death, there will be a CGT issue if the following are true:

  • You are an Australian resident at the time of death;
  • A CGT asset you held passes to a beneficiary of your deceased estate;
  • The estate beneficiary is a non-resident of Australia; and
  • The asset is not real estate in Australia or an interest in real estate in Australia.


Any CGT liability that arises is met from your deceased estate prior to determining the amounts available for distribution to your beneficiaries, thereby reducing the overall inheritance amount.


There are however some strategies you can put in place to minimise these consequences.  Depending on the assets within your estate, you may choose to bequeath non-CGT assets (e.g. cash) to non-resident beneficiaries and CGT assets to Australian-resident beneficiaries.  If you are unable to split your assets equitably amongst your beneficiaries without leaving CGT assets to non-residents, it might be worthwhile considering the establishment of an Australian-resident Testamentary Trust that would come into existence upon your death, for the benefit of your non-resident beneficiaries.


While it’s something we don’t like to think about, estate planning is a complex issue regardless of residency.  There are other potential tax issues that could have an impact on the overall inheritance available for distribution.  In many situations it can be helpful to have your will reviewed by a trusted advisor who can address any potential tax problems before it’s too late.


Careful estate planning is essential to ensuring your beneficiaries receive the amounts you actually intend to leave them when you’re gone.  If you have any concerns or questions regarding your estate plan, please contact your ESV engagement partner on 9283 1666.


Article by David Prichard