Inheritance Tax In Australia – FAQs
It is important to understand the reason for an Australian will as a person from the UK. The UK inheritance tax laws mean HMRC can make a claim on your worldwide estate if you do not comply with all the necessary regulations. To ensure your estate is protected from unnecessary taxes and to ensure it can be legally passed on to the person of your choice Haskew Law, offer a complete solution.
There is No Inheritance Tax In Australia
There is no inheritance tax in Australia, with all states in Australia abolishing what was known as death duties in 1979 following the lead of the Queensland Government led by Joh Bjelke-Petersen. However, assets acquired from the estate may become subject to Capital Gains Tax. This is a welcome departure from the UK's tax system but, to benefit fully your estate will need to be prepared correctly.
Is it necessary to have an Australian Will?
The purpose of a will is to communicate your wishes about what will happen to your personal possessions after you die. It is a written legal document setting out the people you would like to inherit specified parts of your estate.
It is recommended that most people make a will so that they may specify who they want to inherit their estate and to avoid the complicated intestacy procedures necessary where there is no will.
The laws in relation to wills and inheritance in the Australian states are different to those in the jurisdiction of England and Wales. If you have assets in both Australia and England, these differences will need to be carefully considered when you are preparing a will whether in England or in Australia.
Australian law does recognise a will that has been prepared in another country and therefore Australian assets could be dealt with together with your English assets under a carefully drafted English will. However, it is usually recommended to make a separate Australian will dealing with your Australian assets. You should always consult a specialist lawyer to advise you as to what is best for you in your individual circumstances.
If both Australian and English wills are prepared each will can independently deal with the assets in their respective country avoiding delays and complications. This can make it significantly easier for your loved ones to deal with the administration of your estate on your death and could reduce both the costs and the associated hassle.
You will however need to ensure that the wills do not conflict or revoke one another and that they work together to achieve the intended result. You should therefore ensure that any lawyer you instruct to prepare a will whether in Australia or in the UK is aware of the contents of any other will that you have.
Who will inherit my Australian Assets?
Under Australian law anyone making a will has “testamentary freedom” which means that you can choose whoever you want to inherit your estate and in whatever proportions. You just need to set out who you would like to inherit your estate in a valid will.
If there is no valid will the assets in Australia will be inherited in accordance with the procedures set out in law. Who will inherit with depend on your family circumstances and the type of assets that you have.
Will there be inheritance tax to pay in Australia or in the UK?
This will depend on a number of factors and your personal circumstances.
As a general rule, if you are “domiciled” in the UK at the date of your death your worldwide estate (i.e not just the assets in the UK) will be liable to UK inheritance tax (IHT).
IHT is charged in the UK at 40%, however, everyone is entitled to a tax free amount (also known as the “nil rate band”) which is currently £325,000 (or up to £650,000 for married couples and registered civil partners if the “transferrable nil rate band” applies). This means that the combined value of your worldwide estate is calculated and only the amount that is over the tax free amount will be taxed at 40%. The tax is paid from the assets in the estate before they are distributed to the beneficiaries.
The question of whether or not a person is domiciled in a particular country for inheritance tax purposes is an extremely complex one. You should always obtain expert legal advice to ensure you understand how this will be dealt with on your death so that you can obtain the intended results for your beneficiaries.
Your “worldwide estate” includes the value of your assets in England, Australia and any assets that you may have in any other country. It may also include any gifts that you have made within the last 7 years.
There may be some exemptions or reliefs available in respect of the amount of IHT payable depending on who your beneficiaries are and the nature of your assets. Your lawyer may be able to advise you about what is available in your circumstances.
If you are not domiciled in the UK, UK inheritance tax will only apply to your assets that are located in the UK. If there are no assets in the UK and only Australian laws apply, there will be no inheritance tax to pay as there is no inheritance tax in Australia.
Succession tax planning is extremely important if you want to ensure your beneficiaries get to keep as much of their inheritance as possible. Professional advice and careful planning can often make a significant difference to the amount of tax payable.You should always ensure that you get proper specialist advice in relation to your individual circumstances. Your lawyer can discuss inheritance tax planning with you as part of the preparation of your will.
Administering an Australian estate
Who can administer an Australian estate?
Under English law the personal representative (“executor” if appointed in a will or “administrator” if appointed by law) is in charge of administering the estate and is legally entitled to deal with the deceased’s assets. They will be responsible for carrying out the administration of the estate, collecting in the assets, ensuring payment of any debts, funeral expenses and tax and distributing the remaining assets to the beneficiaries.
Executors can be appointed under an Australian will. If there is only an English will a Grant of Probate (a document issued by the probate courts confirming the validity of a will and / or confirming the personal representatives) can be re-sealed by the Australian courts for use in Australia. This confirms the status of the executor appointed under that will so they may deal with the assets in Australia.
Do I need to instruct a lawyer in Australia?
It is important for English executors and English solicitors dealing with an estate involving Australian assets to have independent legal advice from a lawyer who has experience dealing with Australian and UK succession law.
The lawyer can advise you to ensure that you understand the process and the legal documents that will be required when dealing with the Australian estate. This can prove vital in ensuring that the estate is administered properly, as quickly as possible and in the best interests of the beneficiaries.
A lawyer in Australia can also be appointed under a Power of Attorney to deal with the formalities of dealing with the estate and to sign the documentation required in Australia, which may make matters easier. At Haskew Law we can prepare your Australian will and complete your UK will conversion to Australian law prior to your departure to ensure your estate is protected under Australian law on your arrival.
What are the steps involved in administering an Australian Estate?
If the deceased had an English will but no Australian will, it will usually be necessary for the validity of the will and the status of the personal representatives to be confirmed by a Grant of Probate (or a Grant of Letters of Administration where there in no will) obtained in England.
If this has been obtained you can arrange for a lawyer in Australia to reseal this Grant at an Australian Court for use in Australia. This will then allow the personal representatives to release the assets and distribute these to the beneficiaries.
If there is no English will or a Grant of Probate will not be obtained in England, an Australian Grant of Probate will usually need to be applied for in Australia. Your lawyer in Australia will be able to assist you with this. The basic procedures for deceased estates are generally the same in each state or territory of Australia. When probate has been obtained, the personal representative can distribute the assets in the estate between the beneficiaries in accordance with the will
How long will it take?
The timescale for winding up an estate depends on the details of the estate in question and can vary significantly. It is not uncommon for it to take 12 months or more to fully administer an estate, particularly if it is necessary to wait for the Grant of Probate in England to be obtained before the assets in Australia can be dealt with.
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