Question 1

Hi, my wife and I are in early 40s. We both are Australian citizens, working in Melbourne on a full-time basis and have no children. We are first-generation immigrants with our siblings and parents overseas (India). So while doing some wealth/estate/will planning the question often comes as to if we can pass on our inheritance (super, property assets, shares or savings) to any of our younger siblings, nephews and nieces who are non-Australian citizens or residents (and working and residing overseas). Would there be any tax deduction by ATO before it can be passed onto our relatives overseas? Any information or steps we can take to execute it would be greatly appreciated.

This is a tricky question, so I have enlisted Kylie Costigan, Special Counsel & Accredited Specialist at Estate First Lawyers, who has provided this response:

Australian succession laws allow you as an Australian citizen to gift your assets to legitimate beneficiaries whether they reside here or overseas.

In short, you can leave assets to your relatives who are not in Australia.

This is subject to the possible operation of family provision rules in each Australian state and territory which, if applicable, may override your full testamentary freedom in this regard.

These rules state that an eligible claimant can bring a claim after your death for adequate provision from your estate and the court may grant the claim if they feel you have not adequately provided for the eligible claimant.

Who can claim differs from state to state, and typically include spouses and children (often also including stepchildren).

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Just to complicate things, different laws apply to the succession of assets depending on where you live and where you hold assets, as well as what types of assets you hold!

In terms of taxation, wills which contain a non-Australian resident executor or non-resident beneficiaries are subject to different tax rules to wills and estates with all relevant persons being Australian residents for tax purposes, and those rules are usually not more favourable.

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For example, trusts with a foreign connection may have adverse tax implications, and this would include where an executor is a non-resident (because estates are a type of trust) as well as testamentary trusts where the trustee and/or beneficiaries are non-resident.

Further, the rollover relief for capital gains tax (CGT) does not apply where gifts of certain assets (such as property and shares) are gifted in a will to non-resident beneficiaries.

It is also wise to see if there are any taxation issues in the foreign beneficiary’s resident country in relation to receiving an inheritance (or income from an Australian trust).

And it is not only the trusts in the will that are affected.

If you hold wealth in an Australian discretionary trust, but include your overseas resident family members as beneficiaries (or even potential beneficiaries), then this could well have adverse income tax and land tax implications.

Estate planning is complicated, and it is very important that you and your estate planning lawyer consider the jurisdictional issues and taxation laws when preparing your wills and estate plan particularly where there is a foreign element.

Question 2

My wife and I are both 63 and both retired. I have $1,100,000 in an allocated pension account from which I am drawing down the minimum monthly amount. I also have less than $1000 in an accumulation fund. My wife has $500,000 in an accumulation fund. We plan to sell our holiday house this year (approximately $800,000). Can we each put $360,000 into our accumulation accounts, even though we are both retired? All three accounts are with different superannuation funds.

Yes, you can both make after-tax, non-concessional contributions to super of up to $360,000 each using the “bring-forward rules”.

$360,000 is the maximum anyone can currently make under these rules, however, it is dependent on your total super balance.

Please see the table below for these figures:

If you have made a large capital gain from your holiday home, you could also consider making personal tax-deductible (concessional) contributions to super.

As you are under the age of 67, you do not need to meet a work test to make this contribution.

If you want to explore this option, I suggest seeking tax or financial advice to ensure an appropriate amount is contributed and claimed in your tax return.

Finally, the above contribution rules are not to be confused with the downsizer contribution rules.

If you are 55 or older, you may be able to contribute up to $300,000 from the proceeds of the sale of your home into your superannuation fund, this is in addition to the normal non-concessional and concessional contributions.

However, the home must have been owned for 10 years and have been your primary residence for at least part of that ownership. So if it has been your holiday home for the whole time, a downsizer contribution would not be possible.

Craig Sankey is a licensed financial adviser and head of Technical Services and Advice Enablement at Industry Fund Services.

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.