Estate Planning for Foreign Residents: Key Legal and Tax Considerations
Wills and Estates: 15 April 2026
Author: Joel Parsons - Our People
Administering a deceased estate is challenging at the best of times, however, the difficulty increases significantly when cross-border elements are involved, particularly when executors or beneficiaries are located outside Australia.
Australia is an extremely multicultural society, with a large proportion of the country’s population born overseas. As a result, it is increasingly common for Wills to appoint executors and beneficiaries who reside outside Australia.
As everyone knows, tax is a certainty in life. However, good estate planning can assist in avoiding paying unnecessary and inadvertent tax. Although inheritance tax doesn’t exist in Australia (at this stage anyway), we do have income tax and Capital Gains Tax (CGT) which are applied to monies earned and assets sold respectively. It is important to be aware that where an executor resides may have taxation consequences for an estate.
Resident v Non-Resident Estates
In Australia, a deceased estate is treated as a trust for taxation purposes. It will be catergorised as either a:
- Resident Trust; or
- Non-Resident Trust.
Resident Trust
According to the Income Tax Assessment Act 1936 (Cth), an estate is a Resident Trust if:
- at least one trustee (Executor) is an Australian resident at any time during the relevant income year; or
- the Central Management and Control (CMC) of the trust is in Australia at any time during the relevant income year.
If an estate is deemed to be a Resident Trust, it will be subject to Australian tax laws. The Australian Taxation office (ATO) will however require evidence which demonstrates that high-level decisions of the estate were made in Australia at some point throughout the year. This is particularly important where executors, beneficiaries, or assets are located overseas.
Non-Resident Trust
An estate may be classified as a Non-Resident Trust if Probate is granted to an executor who is not an Australian resident, or there are no Australian resident executors. If this is the case, the estate may lose access to certain tax concessions which are otherwise available to estates administered by Australian executors.
Tax Consequences for Non-Resident Trusts
If the sole executor of an estate is a non-resident, the estate will be taxed as a non-resident, irrespective of whether the deceased was an Australian resident or not. This means:
- There is no access to the tax-free threshold (currently $18,200) for the first three years after death;
- There may be a potential loss of franking credit refunds; and
There may be exposure to additional land tax surcharges in some jurisdictions.
A non-resident executor also cannot access the 50% CGT discount, which would otherwise allow a 50% reduction in capital gains tax on assets held for at least 12 months. If an executor is a foreign resident, the Foreign Resident CGT Withholding Regime may also apply.
If a beneficiary lives overseas, this may also impact on the entitlements of the remaining Australian resident beneficiaries. If a non-resident beneficiary is to receive real property under a Will (either in their personal name or in the name of a trust established for their benefit), they may need to submit an application to the Foreign Investment Review Board (FIRB), which is a timely and expensive process with no guarantee of approval.
Penalties for Non-Compliance
Executors are responsible for complying with the various tax rules which apply to Non-Resident Trusts and may face penalties for failure to do so. Practically, it may not be appropriate or convenient for a foreign executor to be appointed.
Practical Solutions to Minimise Unnecessary Tax
Ultimately, to eliminate the above-mentioned taxation implications, at least one Australian executor should be appointed to administer a deceased estate. Having one local executor will mean that the estate is treated as an Australian resident trust for taxation purposes. This can be a family member, trusted individual, licensed trustee company, accountant or lawyer.
As well as ensuring one of the executors in your Will is an Australian resident, there are other ways in which you can protect your assets and minimise taxation implications. To avoid disproportionate fees paid on assets, you may direct the sale of real property before distribution to foreign beneficiaries in your Will. By liquidating the asset, the distribution is finalised and simplified into cash terms, eliminating the need for your executors to navigate through complex foreign taxation laws.
Estate planning documents should also be reviewed regularly to ensure they remain up to date with changing family circumstances, living arrangements and tax laws.
At Aitken Partners, we work with individuals and families to structure their affairs in a way that protects assets, provides certainty and supports intergenerational wealth transfer.
We have deep expertise in drafting and advising on effective succession planning. If you would like to learn more about foreign resident estate planning and the tax considerations which follow, please contact one of our experienced and friendly lawyers on (03) 8600 6000.