Lady A used to live in overseas, and joint owned a house with her husband in their own country. This house was always their home house.
Lady A migrated to Australia in 2000, bought an apartment and lived in with her daughter (husband did not want to come). Due to her daughter was a student studying with uni, Lady A normally stayed half year in Australia and another half back to her own country.
Lady A has become Australian Citizen in 2005.
Lady A had suffered cancer and passed away in 2009, she gave the apartment to her daughter in her will.
Question:
If she was treated as non-tax resident of Australia, did estate trust have CGT event or not, when the apartment was passed over to her daughter? Bearing in mind, she had another property in overseas at the same time.
Before she died, she hadn't been living in Australia for more than 2 years due to her illness. Was she still Australian tax resident? Her husband was with her all the time when she was sick. The apartment has never been rented out, because her daughter (older than 18 yrs old) was living in.
Was estate trust as tax resident of Australia or non-tax resident? The main income for the estate trust would be interest income for more than $50,000pa from Australian bank accounts.
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论文题。。鉴定完毕
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Is true case, happen to my friend.
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这种事情只有找会计。。需要很详细的信息才能做判断。。论坛上不可能 post私人信息。。
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The information you provide is not enough to determine the tax residency.
Important information is missing:
1. Where was her main source of income from?
2. Receive Pension in Australia /overseas?
3. Has she filed her tax returns in Australia in the past?
4. Is she also a permanent resident of the foreign country?
5. When she departs from Australia, has she informed the bank to withhold 10% interest WH tax?
Factors indicate the Mum is a Australia tax resident
1. She was an Australian citizen and lived in Australia for part of each year
2. She had property, bank accounts and other financial assets in Australia
3. Based on this information the person was considered to be an Australian resident as her behaviour in Australia reflects a degree of continuity, routine or habit that is consistent with residing here.
Factors against the Mum to be an Australia tax resident
1. Maintained a permanent home in the foreign country.
2. Husband is in the foreign country
3. She lived in the foreign country in last two years
The mum may be classified as dual residency for tax purpose.
Australia has entered into a tax treaty with the overseas country (the Convention) as contained in Schedule 1 to the International Tax Agreements Act 1953. The Convention operates to avoid the double taxation of residents of Australian and the foreign country by allocating taxing rights over various types of income in each country.
If you are a resident of Australia and also a resident of the foreign country for tax purposes, the Convention provides rules (the tie-breaker rules) which determine your residency for the purposes of applying the provisions of the Convention.
Under the Convention, the tie-breaker rules ensure that a dual resident individual is treated as a resident of only one of the countries for the purposes of working out the liability to tax on their income.
Based on the limited information, I personally think the late mum ceased to be an Australian resident for tax purposes when she left Australia two years ago as she is not considered to have been an Australian resident for tax purposes under any of the tests of residency. For the purposes of applying the Convention, the Mum was solely a resident of the foreign country. Therefore, she was not considered to be an Australian resident for taxation purposes.
Assume the late Mum is not an Australian tax resident, and then the following will apply:
1. Interest income is subject to WH tax (10%). From the date the deceased became a foreign resident any interest income also would have been subject to foreign resident withholding tax. Therefore, if her only source of income from Australia was interest and dividends, she/administrator is not required to lodge a tax return.
2. However the administrator of the estate is required to lodge a tax return if the estate had made a capital gain on any assets that have the necessary connection with Australia during the income year. The transfer of title from the estate to the daughter will not trigger CGT. Only the disposal of the apartment by the administrator will trigger CGT.
3. The apartmen ceased to be the Mum’s main residency two years ago. It will become “investment property” when she becomes non-resident two years ago. There is no CGT issue for the title to be transferred from the estate to her daughter; the daughter will inherit the decease’s cost base. The cost base is not the original price the Mum paid. The cost base was reset when her Mum became non-resident two years ago, the market value of the date the late Mum departed Australia is the cost base for her daughter.
However, if the late Mum is an Australian resident for tax purpose, then the following will apply:
1. Given that the apartment was used as a main residence by the late Mum before she went overseas, she may choose to continue to treat it as her main residence even though she no longer lives in it, for example going overseas temporarily. Since she does not use the apartment to produce assessable income the apartment can be treated as her main residence indefinitely. The absence choice made when the late mum went overseas means that the apartment will be considered to be her main residence at her date of death.
2. Death does not usually result in the realisation of a capital gain or loss to the deceased.
3. Since the apartment was her late Mum’s main residence, when the daughter subsequently disposes of it, the capital gains tax issue is as follows:
• If the daughter is going to use the apartment as her main residence from the date of the deceased’s death until it is sold her, the capital gain is disregarded.
• If the daughter is NOT going to use the apartment as her main residence, the capital gain is only disregarded if the dwelling is sold within two years of death
4. Interest income - Final tax return may be required for deceased person from 1 July to date of death
If the interest income is earned after the date of death , the executor should lodge a tax return as part of the administration of the estate. To the extent beneficiaries are not presently entitled to the net income of the deceased estate, the tax liability will rest with the deceased estate. For the first three years' tax returns, the deceased estate income to which no beneficiary is presently entitled is taxed at the general individual rates, with the benefit of the full tax-free threshold.
If the beneficiary is presently entitled and not under a legal disability, they are liable for tax. For example, if the administrator make an income distribution to the daughter, it is the responsibility of the daughterto declare the amount in her personal tax return and pay income tax on it at her marginal tax rate.
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Important information is missing:
1. Where was her main source of income from? Australian bank accounts.
2. Receive Pension in Australia /overseas? NO
3. Has she filed her tax returns in Australia in the past? Never
4. Is she also a permanent resident of the foreign country? Yes
5. When she departs from Australia, has she informed the bank to withhold 10% interest WH tax? No
So, what result would it be?
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I would say the late mum ceased to be an Australia resident for tax purpose when she departed the country two years ago
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By the way, her mum came from Taiwan, don't really know whether Taiwan has double treaty in place with Australia or not?
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这是作业
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Yes. Article 4 of Schedule 1
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1953299/sch1.html
3. Where by reason of the preceding provisions of this Article a person, being an individual, is a resident of both territories, then the status of the person shall be determined in accordance with the following rules:
(a) the person shall be deemed to be a resident solely of the territory in which a permanent home is available to the person;
(b) if a permanent home is available to the person in both territories, or in neither of them, the person shall be deemed to be a resident solely of the territory in which the person has an habitual abode;
(c) if the person has an habitual abode in both territories or in neither of them, the person shall be deemed to be a resident solely of the territory with which the person's economic and personal relations are closer.
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那我岂不是帮助作弊了？
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Of course, not. 作业或論文通常都是在復活節前後，或在九月末十月初交。不會在六月時交。
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One more question for you:
I have been searching for the whole website. They all told me that there would have CGT issue if the property was gone to non-tax resident beneficiary or entities. However, it has no information mentioned about if non-tax resident of the deceased person (esate trust) whether would have CGT issue when transferring Australian property to Australian tax resident beneficiary.
Is there any tax ruling or legislation to support there would not have CGT issue even though Australian property was transferred to tax resident beneficiary from NON-TAX RESIDENT OF DECEASED PERSON (ESTATE TRUST)?
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好主意
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Special rules apply when an asset owned by a person just before they die, passes to a beneficiary of their estate.
Section 128-15 of the ITAA 1997 provides that the beneficiary's deemed date of acquisition of property from a deceased estate, is the date of the deceased's death. Regardless of the actual date that legal title in the property passed, for capital gains tax purposes you are considered to have acquired the property in question on the date of the deceased's death.
Section 128-20 of the ITAA 1997 stipulates that a CGT asset passes to a beneficiary in a deceased estate if the beneficiary becomes the owner of the asset:
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if the asset passes to a beneficiary who is not an Australian resident, CGT event K3 only happens if the deceased was an Australian resident just before dying and the asset in the hands of the beneficiary does not have the necessary connection with Australia.
In this case, there are no CGT implications on the death of the deceased. CGT event K3 will not apply because when the deceased passed away she was not a resident of Australia.
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Sorry, I don't really get it.
My question was:
If the deceased person herself was not a tax resident of Australia, the Australian property was transferred to an Australian beneficiary five months after death. Was there any CGT issue?
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No CGT issue as per section 128.10 ITAA97.
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This secion only talked about when the property was passed to an Australian beneficiary that would be no CGT, and the deased person was an Australian tax resident.
My question was:
If DECEASED PERSON HERSELF WAS "NOT" A TAX RESIDENT, then would it be still under the excetpion rule?
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五樓很專業!
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The daughter is taken to have acquired the apartment on the date of death of the deceased (section 128-15 of the ITAA 1997).
There is no other CGT event, the transfer of the apartment from the deceased to the daughter does not trigger CGT, even though the deceased was a non resident.
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Thanks.
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之前 trust estate 的 residency issue 我弄错了
the residency of the deceased trust is not the same as the residency of the deceased.
As per Section 95(2) of the ITAA 1936 :
a trust estate shall be taken to be a resident trust estate in relation to a year of income if -
(a) a trustee of the trust estate was a resident at any time during the year of income; or
(b) the central management and control of the trust estate was in Australia at any time during the year of income.
In this case, if the Will appointed resident individual as trustee, the deceased estate is considered to be a resident trust estate for taxation purposes.
Having regard to the above, the trustee of a resident deceased estate of a person who died less than three years before the end of the year of income, is taxed at general individual rates and entitled to a tax free threshold of $6,000.
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Thank you.
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