Effective from 7 September 2016, the Commissioner for Taxation has issued a variation which clarifies the application of the Foreign Resident Capital Gains Tax Withholding Regime ("the Regime") to deceased estates. The Commissioner's determination states that where, as a result of the death of an individual:
- the legal personal representative acquires the relevant asset following the death of the individual;
- a beneficiary obtains ownership of the relevant asset by way of direct transfer from the deceased or by transfer from the legal personal representative of the deceased; or
- a surviving joint tenant acquires the deceased joint tenant's interest in the relevant asset;
the amount to be paid to the Commissioner in relation to the transactions is varied to nil.
The Regime commenced on 1 July 2017 and required a clearance certificate (or variation) to be obtained on the transfer of Australian Taxable Property (which includes real estate) with a value greater than $2 million. The purpose of the legislation is to ensure that foreign residents pay capital gains tax. The Regime presumes that any person disposing of Australian Taxable Property is a foreign resident, unless a clearance certificate (or a variation) is granted.
However, since its introduction, the Regime created an additional burden for wills and estates solicitors who might be required to obtain more than one clearance certificate for a property as a part of the administration of the estate. Further, the vast majority of estates concern those who are all Australian tax residents. Thus the Commissioner's variation is a welcome relief for wills and estates practitioners.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.