Inheritance tax and inheritance law in Australia
Taxation Researcher | July 18, 2021
The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Australia: what restrictions there are and whether making a will is advisable.
How high are inheritance taxes in Australia?
There are no direct taxes on inheritances.
Thanks to Russell Kennedy
What inheritance laws apply in Australia?
Australian laws apply to inheritance of property.
The appropriate jurisdiction for property located in Australia is the state or territory in which the property is located. Following the death of the property owner, the relevant Australian state or territory laws apply, irrespective of the nationality, religion, or place of residence of the deceased or beneficiaries. If the deceased was married, the jurisdiction in which the relevant parties were married is irrelevant, although foreign marriages are recognised in Australia for the purposes of Australian law.
Any property inheritance disputes are usually resolved in the relevant State Court. The Court in which the matters are heard depends on the value of the property, as differing Courts have different monetary limits.
There is no reserved portion.
Under Australian law, there is no ´reserved portion´ of the estate which must go to certain persons. Anyone is free to make a will as he/she chooses. Most people in Australia make a will; however, a person may be entitled to challenge the will on the grounds that the deceased had a moral obligation to provide for them. No categories of persons are specifically excluded from inheriting under a will.
It is advisable to make a will to dispose of assets in Australia.
It is possible to apply for a "reseal" of a Grant of Probate obtained in another jurisdiction for a will executed there, but the process requires obtaining a Grant of Representation for the will in the original jurisdiction. Therefore, to minimize delays and inconvenience abroad, it may benefit a non-resident with mainly land interests in Australia, to have a separate Australian will.
Under Australia law, the will maker may specify that their will is only intended to apply to their Australian assets, and that they have made other arrangements for their assets in other jurisdictions.
In the case of intestacy, set rules apply as to the distribution of an estate. These depend on whether the deceased left a spouse (which may include a common law spouse or same-sex partner) descendents, or if neither, their extended family, including cousins and even second-cousins in some Australian States.
If the deceased has no surviving relatives who fit the intestacy rules categories, the estate passes to the Crown, i.e., to the relevant Australian State government common fund.
Gifts can be made during the lifetime of the property owner.
The general rule under Australian law is that persons are entitled to dispose of their assets as they wish, either in life, or after death (in accordance with their will). A gift given during life is not usually open to challenge, unless it can be shown that there was a defect in the ownership (for example, the donor did not actually own the property that they purported to give) or for other reasons which may effect the validity of the gift (for example, if the gift was procured through threats, undue influence, or fraud).
A person is not entitled to challenge a specific gift made by the deceased during their life on the grounds that the deceased had a moral obligation to provide for them. Any claim made against an estate for further provision is a claim against the whole estate within the jurisdiction of the claim, not against any one particular asset.
In determining ownership, the courts look first at the Certificate of Title, then at claims to equitable ownership.
Generally, in dealing with property ownership, the Courts look first at the manner of holding noted on the Certificate of Title. However, there are also instances where equitable interests in the property can be claimed by others, for example, when one party holds the property (or a part of it) on trust for the other, so that the ownership of the property is not truly as it appears on the Certificate of Title.
All Australian jurisdictions operate on a registration system for land ownership, and property owners are advised to retain the services of a lawyer or a conveyancer in the appropriate jurisdiction to ensure that they are properly registered on the Certificate of Title.
Property may be inherited by minors.
If a property is given to minor beneficiaries by will, then it is the responsibility of the executor to hold the property on trust for the beneficiaries until the age of majority (18 in Australia) or older if specified by the will (usually 21 or 25). A testator may appoint a guardian for their own children in their will (in the absence of the childrens´ other parent) but if the guardian is not the same person as the executor and/or trustee, it is the trustee who has control over the property, not the guardian. If there is no guardian for children residing in Australia, or if the appointed guardian is unsuitable, the Family Court of Australia appoints a guardian for the children until they reach majority.