Tax on Inheritance Money from Overseas
According to H&R Block, “The inheritance is not taxable unless you are advised by the executor that a part is taxable. However, if you invest the income from the estate then any earnings will be taxable.”
If you are the executor of a will or estate, you are responsible for the deceased individual's tax affairs. Currently, Australia does not have death duty. But be aware that some financial transactions that occur as a consequence of a person's death are still taxed.
The taxation responsibilities you need to be aware of are outlined very clearly by the Australian Taxation Office. Check out their website or call one of their officers – or talk to your accountant and seek their assistance.
After a person dies their estate can continue to gather income – either from unpaid wages, interest on bank accounts, dividends from shares and capital gains from the sale of any assets. Until full administration of the estate is organised, a trust tax return is payable on any taxable income. This tax must be dealt with by the executor or by beneficiaries who are named in the will. Again, if you’re unclear, speak to the Australian Taxation Office direct, or call your accountant to help.
What About Moving to Australia for the First Time, Income Earned from Overseas Sources or Monetary Gift from Overseas?
In these situations, read our related article below:
Capital Gains Tax
Even when it comes to the transfer of assets from a deceased person’s estate, Capital Gains Tax (CGT) still applies.
The date this transfer occurs is considered as the date of the death.
Property, fund investments and shares are the most common assets transferred.
Any assets that were transferred before September 20, 1985 are pre-CGT and, therefore, exempt. Make sure you hold on to any records related to this for full compliance.
Exemptions from CGT also apply- as long as they are related to the transfer of many assets that are passed to either a beneficiary or a personal legal representative. Be aware, though – CGT needs to be paid if an asset is transferred after death to:
- A foreign resident
- A tax-exempt entity, for example a charity, church or superannuation fund trustee
For full details on capital gains tax payments, visit the website of the Australian Taxation Office.
Inheritance law in Australia varies in each state or territory. These laws were rewritten and updated in 2011 and there is a progression towards a uniform law across the country.
Generally, the executor of a will is the one responsible for ensuring that there is full compliance with inheritance laws.
If you’re confused, contact your local Public Trustees office in your state or territory to find out about specific rules related to your location.
If you are named the executor of a will, you will be responsible for:
- Notifying all beneficiaries of the will
- Valuing and looking after the estate
- Obtaining the authority, usually from your local Supreme Court, to administer the estate
- Ensuring all tax returns are completed and lodged
- Taking care of all outstanding debts
- Overseeing the division of the estate and all associated assets
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